The Australian Forex Market had an average daily turnover of $135.8 billion in 2021, with a national average salary for an Australian trader standing at $120,000. Forex trading is one of the most lucrative ways to profit from both rising and falling markets.
Trading forex in Australia is simple and completely legal. Let’s take a look at how you can start trading forex:
What are the Australian forex regulations?
All forex brokers in Australia are authorised, monitored and regulated by the Australian Securities and Investments Commissions (ASIC). This enables Australian traders to have a secure and transparent trading environment, maximum leverage, client fund security, and access to one of the most popular and traded currency pairs.
Rules and regulations that brokers must comply with in Australia:
- All brokerage firms willing to offer a forex trading platform must register for an ASIC authorisation and commence business only after they receive it.
- All funds by traders must be held in secure and separate accounts in order to have all balances safe in case of broker bankruptcy.
- Every broker must have an actual office working space and agree to be audited regularly.
- It is mandatory to have at least $1 million AUD dollars of working capital in order to apply for an Australian trading licence.
- Any situation not handled as expected by the broker is transferred to the ASIC’s responsibility, along with sanctions and investigations against the broker.
Rules and regulations for forex traders in Australia:
- Leverage limits for trading traditional securities like oils, CFDs and currency pairs are higher than trading newer securities like crypto CFDs.
- All profits made in the forex markets are to be duly reported and shown at the end of each financial year in the total taxable revenue.
- All losses are subject to a deduction from tax.
- There exists a limit of $1,000 AUD dollars when transferring funds from a new account to a broker via a credit card.
- If you are a new trader, you will be provided with lower leverage, and as you gain more experience, the leverages will expand.
- A trader must only choose a broker listed on the ASIC website.
Steps to start trading forex in Australia
1. Choose an ASIC authorised and licensed forex broker
Start by choosing a reliable forex broker that offers competitive spreads and a seamless trading environment. The lower/tighter the spread, the more affordable the trade is, as it lowers the trading costs.
2. Open a forex account
Open a live trading account with the forex broker like Blueberry Markets to start currency pairs. The minimum account deposit requirements vary from broker to broker and can range anywhere between $50-$2,500. You can also start trading with a demo account to practice, and shift to the live account once you get the hang of the market.
3. Choose the currency pair to trade
There are over one hundred currency pairs in the forex market that you can trade. You can pick one or two currency pairs to start trading and diversify your portfolio with time. The three types of currency pair you can choose from are –
- Major currency pairs that consist of the USD as one currency and other prominent currencies like EUR, JPY, GBP, AUD, CHF and CAD as the second one
- Minor currency pairs that consist of all the prominent currencies in the world except the USD
- Exotic currency pairs that consist of the least traded currencies like TRY, MXN, etc.
4. Analyse the currency pair’s price chart
After deciding the currency pair(s) you want to trade, analyse its historical price chart to understand the market trend. The analysis will give you an idea of where the market is headed and its future projections.
5. Go long or short
The currency pair market analysis will provide you with the current market trend, based on which you can decide to long or short a trade. Since all currency pairs are quoted in the form of one currency versus the other, buying a currency pair refers to buying the base (left) currency and selling the quote (right) currency. The base currency tells a trader how much of the quote currency you need to buy a single unit of the base currency. For example, if USD/EUR = 2, this means that 2 EUR is needed to buy 1 USD.
- If the base currency market is strengthening and is in an uptrend, traders can place a buy/long order
- If the base currency market is weakening and is in a downtrend, traders can place a sell/short order
6. Manage risk
Manage your trading risk by using take profit and stop-loss orders. These two orders help exit a trade automatically when the market moves against you.
- Stop-loss orders are an automatic indication of closing the trade at a specified lower price than the current market price to limit losses.
- Take profit orders enable traders to specify exact prices at which a trade will automatically close if the current price reaches the specified limit. If it does not, the order is cancelled.
7. Close trades after monitoring
After you enter a long or short trade, monitor it closely on a daily basis to identify market trends. You can track market prices and open new positions during an uptrend and close the positions during a downtrend. The profits or losses made are instantly reflected on the trading account’s cash balance once a trade is closed.
Start trading forex in Australia today
The Australian forex market rules are more flexible when compared to regulations in other countries. It provides traders with the opportunity to trade one of the largest forex markets in the world. Start trading with Blueberry Markets to experience competitive spreads and a seamless trading environment.