The Best Forex Brokers in Australia

The term ‘forex’ is an abbreviation for foreign exchange and can be understood as a network of buyers and sellers who trade different currencies on the foreign exchange market.

This is done by individuals, companies, and central banks who convert one currency into another at an agreed price. Forex trading can be done for practical reasons like converting currencies when travelling abroad. Most of the time, however, the main goal of forex is to earn a profit.

Let’s take a look at the best forex brokers in Australia, based on a range of criteria such as regulations, fees and minimum opening deposit, supported platforms, trading options, security, and customer support.

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Best Forex Brokers in Australia: Reviews 2020

Plus500 logo

5 / 5

1. Plus500

ASIC regulated: Yes.

Minimum opening deposit: $100.

Support: Email, phone, and live chat.

Platforms: Plus500 Web Platform.

Plus500 has built a solid reputation in the world of CFD and forex trading as one of the leading forex brokers. Its headquarters are located in Israel but the company has extended its jurisdiction around the world. Australian traders will be happy to know that Plus500’s Australian subsidiary, Plus500 AU LTD, has an office in Sydney, and it’s fully regulated by ASIC.

The minimum opening deposit on Plus500 is AU$100. When opening a new live account, the broker offers an attractive bonus on your first deposit for a better market kick-off. The bonus amount depends on how much you deposit to your account. For example, for $300 you get an $80 bonus, for $750 you get a $200 bonus, etc. You can see the whole list on the broker’s official website.

Plus500 doesn’t charge commissions on trades, only the spread, which varies according to market volatility and whether there’s high or low liquidity. There’s also the “Overnight Funding Time”, a fee for leaving your position open during the cut-off time to cover the cost for the money you’ve borrowed. This is calculated by multiplying the trade size * opening rate * daily overnight funding %. If your account has been inactive for more than 3 months, you’re liable for a $10 fee.

You can access the platform from your desktop on Windows 10, through your web browser, or on your smartphone and iPad. The mobile app provides intuitive and knockout user experience and can be used to monitor trades and live markets. Plus500 allows you to create a demo account to get acquainted with forex trading and experiment with strategies.

This forex broker is a great place to start forex trading because it offers negative balance protection and guaranteed stop-loss orders. You can set a maximum loss amount and the broker guarantees that you won’t exceed it. This is unlike regular stop-loss orders that offer no protection when there’s a sudden increase in volatility.

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etoro logo

4 / 5

2. eToro

ASIC regulated: Yes.

Minimum opening deposit: $50.

Support: Live chat and website Support page.

Platforms: eToro Trading Platform.

Founded in Tel Aviv in 2007, eToro  also has an ASIC-regulated office in Australia, together with offices in the US, the UK, Cyprus, and Israel. According to the official website, eToro has an amazing number of 200,000 active users worldwide.

eToro has a justly acquired status among brokers and trading platforms as the largest social trading network in the world. Social trading is a fairly new concept that allows online traders to observe and imitate the investment strategies of leading investors. This type of copy trading benefits the experts too, as they get rewarded when someone copies their actions. Although simply copying someone else doesn’t guarantee success, it’s still a great way to improve yourself as a trader.

As a forex broker, eToro offers 47 currency pairs, from the most popular to lesser-known ones, traded as CFDs. The platform fosters communication and exchange of experience and trading strategies between clients from the global market. Members of the eToro network can follow them online on their OpenBook platform for live user updates on trending markets. They can also access courses, research materials, and other updates from the industry.

The broker charges a slightly higher forex spreads than other platforms, starting from 1.0 pips for AUD/USD, up to 50.0 pips for less popular currency pairs. However, there are no broker fees or commissions. It also has a reasonable inactivity fee of $10 per month that gets activated after a year of inactivity instead of the usual three months limit set by other brokers. When withdrawing money, you should be aware that they’ll be converted into USD first, including a $25 withdrawal fee.

To open an eToro account you’ll need to provide your full name, phone number, and email address. Next, come up with a username and strong password. To verify your identity just provide a scanned colour copy of a government-issued ID such as your passport and you’re ready to trade! Pretty simple, right?

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Axitrader logo

4 / 5

3. AxiTrader

ASIC regulated: Yes.

Minimum opening deposit: $0.

Support: Email, phone, and 24/5 live chat.

Platforms: MetaTrader4, MetaTrader4 Next Generation, AutoChartist, Axi-One ECN, Psyquation, WebTrader.

AxiTrader is both an Australian based and ASIC licensed forex and CFD broker that has been available to traders since 2007 under the wing of its parent company AxiCorp. It has offices in Sydney, London, Dubai, and Shanghai and boasts with $100 million daily trade volume.

The broker offers a couple of platforms to choose from, the most popular being the MetaTrader4. The quality and practicality of this platform have won praises for AxiTrader. In addition to MT4, traders can use various free add-ons such as MT4 New Gen, AutoChartist, Psyquation, Axi-One ECN, and WebTransfer. On their site, you can browse through many instructive videos to learn how to use these platforms.

AxiTrader offers notable customer support and an all-time accessible live chat. It has some of the lowest spreads on the forex market and charges no subscription or inactivity fee. Best of all, there’s no minimum starting deposit either!

Similar to other brokers, AxiTrader offers a demo account with $100,000 practice funds that you can use for a limited time of 30 days. When you’re ready for some real forex trading, you can choose between a Standard and a Professional account. Both of them offer the same features, the only difference being that the Standard account has no commission fees, while the Professional one adds commission but comes with lower spreads.

To create an account, you typically need to give the broker your full name, address, and contact details. Most of them ask you to provide a copy of your ID as well. AxiTrader goes a step further and asks you to provide employment information including company name and job title, source of funds, and salary level. On top of that, you’ll be asked to pass a short knowledge test to determine your trading experience level.

Once your account has been approved you’ll be notified via email and asked to download the MT4 platform. You might not feel comfortable disclosing so much about yourself, but in the world of online trading, it’s better to be safe than sorry.

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IC markets logo

3.5 / 5

4. IC Markets

ASIC regulated: Yes.

Minimum opening deposit: $200.

Support: Email, phone, and live chat.

Platforms: MetaTrader4, MetaTrader5, cTrader.

International Capital (IC) Markets Pty Ltd. is headquartered in Sydney, Australia and regulated by Australia’s finest financial entity, ASIC. On their official website, the platform boasts on having over 60,000 active traders worldwide, and over $30 billion processed in forex trading on a daily basis!

IC Markets can be accessed from everywhere, whether you prefer using a web browser, or downloading the platform on Windows, Mac, Android, and iOS. It supports MetaTrader 4, MetaTrader 5, and cTrader. Apart from forex, you can also trade commodities, indices, stocks, bonds, cryptocurrencies, and futures.

The broker supports over 65 currency pairs available for forex trading. What’s even more remarkable is that the trade execution takes 40 milliseconds on average! IC Markets charges very tight forex spreads that start as low as 0.0 pips. For example, the average spread for the popular currency pair EUR/USD is only 0.1 pips.

Forex is commonly associated with leverage trading, which is why IC Markets offers a leverage of up to 1:500. This means that a trader’s buying power gets increased 500 times. If you deposit $1,000 you’ll be able to trade with $500,000 to increase the potential profit. This, however, requires a very good knowledge of the market.

There are three types of accounts you can choose from when signing up on the IC Markets: cTrader Raw, Raw Spread, and Standard. The difference between them is, first of all, in the platform they use. As the name suggests, cTrader Raw requires cTrader, the other two are available with MT4/5. All three demand a minimum opening deposit of $200. However, while the Standard account has zero commission fees, the other two incur a $3/3.50 commission and lower spreads instead.

If you’re worried about the security of your funds, you would be relieved to find out that IC Markets keep users’ funds in separately managed bank accounts in Australia with some of the biggest national banks, Westpac and National Australia Bank. The broker has its own funds for company operations and hazardous scenarios.

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IG share trading logo

3.5 / 5

5. IG

ASIC regulated: Yes.

Minimum opening deposit: $0.

Support: Email, phone, and live chat.

Platforms: MetaTrader 4 and ProReal Time.

IG Markets, also known as IG Group, is one of the oldest brokers in Australia and in the world. It’s also the most regulated broker, approved by financial authorities like the ASIC, FCA (Financial Conduct Authority), the Financial Services Authority (FSA), the JFSA (Japanese Financial Services Authority), FINMA (Swiss Financial Market Supervisory Authority), and a couple more.

As a result, IG has to fulfil lots of requirements set by these authorities to maintain the level of customer security and trading experience that they expect, which is why customers don’t have to deal with forex scams or fear they’ll lose their money in times of crisis. IG segregates operational from customer funds which are not used for business activities. Worst case scenario, if IG goes into liquidation, your money is ring-fenced from creditors.

These are just some of the reasons why IG Markets is used by 178,000 traders on a global level. There’s also the advantage of trading both forex and CFDs side by side with over 70 currency pairs and other trading amenities like indices, interest rates, bonds, EFTs, ETPs, IPOs, and commodities.

The platform is designed to cope with a sudden surge of trades without shutting down. IG is quite generous about the permitted leverage level for forex trading which can go up to 200:1. Interested to know about the spreads? IG Markets excels here as well, with an average spread of 0.76 for AUD/USD and 0.70 for EUR/USD. You can try the demo account offered by IG to dive into the market and explore the spreads for your target currency pairs.

On IG Markets, you can assess the forex market through CFDs or L2 Dealer. With CFDs, you don’t have to pay a commission when you open a trade and are allowed to incorporate leverage. L2 Dealer is oriented towards professional traders upon their request. This gives you access to Currenex, a platform where traders can request competitive prices and spreads from a multitude of liquidity providers.

Besides offering first-rate customer support, IG also offers a great deal of educational content, guides, research papers, and webinars with the aim to make you a better trader. The IG Academy app, available for Android and iOS users, includes online training courses.

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Pepperstone logo

3.5 / 5

6. Pepperstone

ASIC regulated: Yes.

Minimum opening deposit: $200.

Support: Email, phone, and live chat.

Platforms: MetaTrader 4, MetaTrader 5, cTrader.

Pepperstone is a popular Australian broker with offices in London, Dallas, Bangkok, and Shanghai. It’s regulated by ASIC and the Financial Conduct Authority (FCA) in the UK. The broker has been awarded for Best Tailored Professional Trading Conditions and Best Client Relationship Manager Service as part of the Professional Trader Awards in 2019.

If you thought IC Markets’ trade execution rate was fast, Pepperstone decreases their rival’s 40 milliseconds to less than 30! This is the fastest rate realized on the Equinix Capital Markets infrastructure that includes Pepperstone and that outperforms brokers from New York and London. This data centre allows Straight-Through-Processing (STP) orders that speed up the trades, making the broker perfect for expert traders and companies.

One of Pepperstone’s drawcards is its Electronic Communication Network (ECN). What this means is that only the best prices get listed, from a range of liquidity providers. As a result, the broker offers very tight spreads. The minimum opening deposit is $200 and Pepperstone gives you the option to choose one of the following payment methods: bank transfer, credit card, broker to broker, BPAY, Skrill, Fasapay, Neteller, Poli, Qiwi Wallet, and Union Pay.

In line with your trading volume and investment plans, you can create a Standard STP Account with zero commissions, or a Razor Account that incurs a $3.50 commission fee per trade but offers low spreads (as low as 0 pips). You can also request an Active Trader program and earn forex cash rebates and access to advanced reporting tools among other benefits.

Pepperstone has partnered with Qantas Frequent Flyer in a programme that offers the exclusive option to earn Qantas Points through forex trading. What should you do to be eligible? Simply open a free Pepperstone Live trading account and activate your Qantas membership. You earn 10 points per $1 on your initial deposit. The most you can get is 10,000 points. Already have an account on Pepperstone? Again, just link your account to your Qantas membership, trade to win points, and redeem them for both domestic and international flights.

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fpmarkets logo

3.5 / 5

7. Bell Direct Share Trading

ASIC regulated: Yes.

Minimum opening deposit: $200.

Support: Email, phone, and live chat.

Platforms: MetaTrader, MetaTrader 5, and IRESS Trader.

FP Markets is the trading arm of the Australian company First Prudential Markets Pty Ltd, with headquarters in Sydney, which has been in the industry for 15 years now. During this time it has received numerous awards for its outstanding customer support, trade execution, and research database.

The broker is regulated by ASIC, meaning that traders can always turn to this institution if they suspect that FP Markets is doing some fraudulent activities with their money. Moreover, as required by ASIC, the broker keeps customer funds separate from company funds and stores them in one of the big four banks in Australia, namely, the Commonwealth Bank.

The minimum opening deposit is $200 which can be funded with a wire transfer, credit cards, FasaPay, Neteller, PayPal, Poli, and Skrill. Similar to Pepperstone, you can open a Standard or a Raw Account with lower spreads, or a demo account with $50,000 virtual funds. If you trade forex via MetaTrader 4, there’s no monthly fee. On the other hand, IRESSTrader incurs a $55 monthly fee but you have more freedom to customize your trading.

Another appealing feature is the ECN model where you can access a competitive forex market with the best currency prices. On the FP Markets website, there are lots of trading courses, articles, and whole ebooks at your disposal. The courses monitor the trader’s progress and you can choose whether to start at a beginner, intermediate, or advanced level.

As of January 2020, FP Markets is offering an Autochartist add-on with an array of trading tools. This service gives you more control over your trades, risk management tools, and real-time market indicators. You can get this package for the web platform and for mobile devices.

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Avatrade logo

3.5 / 5

8. AvaTrade

ASIC regulated: Yes.

Minimum opening deposit: $250 via credit/debit card or $500 via wire transfer.

Support: Phone, email, and live chat.

Platforms: MetaTrader 4, AvaTradeAct web trading, AvaOptions, AvaTradeGo, Automated Trading.

AvaTrade is based in Dublin, Ireland, and regulated by the Central Bank of Ireland. It’s also regulated by ASIC in Australia. This broker’s services are used by more than 200,000 registered traders around the globe who execute above 2 million trades per month. AvaTrade is renown for the supportive attitude and the care it takes for its customers.

The broker charges fixed and floating spreads for all currency pairs. For example, you have a minimum floating spread for AUD/USD set at 2.2 pips or 1.5 pips for EUR/USD. Although reasonable, they’re not among the most competitive on the market. Another drawback is the high minimum opening deposit which is $250 if you pay with credit or debit card, and $500 if you pay via wire transfer.

The AvaTrade platform features an intuitive interface with lots of customization to tailor the screen to your needs. You can combine different charts, payoff diagrams, prices that you want to keep an eye on, etc. AvaTrade includes interactive risk management and Support Professional money manager which can monitor multiple accounts from a single login.

Another innovation brought to you by AvaTrade is their Automated Trading, platforms that allow traders to mirror or copy other traders and their actions. A great opportunity to learn from the best, you can now copy signals and complete trading strategies by signing up on one of the platforms. DupliTrade and MQL5 Signals Service are suitable for MetaTrader, while ZuluTrade is fit for the AvaTrade account.

Still not convinced? You don’t have to make a decision yet. Why not try their demo account for a free 21-day trial first, and see how you’ll get around the platform. For any problems and queries don’t hesitate to contact their support team, available 24/7 on the live chat. The company is also responsive on their Facebook profile and has a YoutTube account with useful trading videos too.

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City Index logo

3 / 5

9. City Index

ASIC regulated: Yes.

Minimum opening deposit: $0.

Support: Email, phone, and live chat.

Platforms: MetaTrader 4, At Pro, and Advantage Web.

City Index is one of the largest retail CFD and forex brokers on the global market. Originally from New York, their office is based at the heart of Sydney, and they’ve been available in Australia since 2006, offering local support complying with ASIC regulations. City Index is operated by GAIN Capital Holdings Inc, listed on NYSE.

They’re co-founders of the Australian CFD and forex forum whose aim is to offer maximum protection to customer funds. You can rest assured that this broker won’t use your money to finance company operations or pay off debts.

If you join the platform now, you’re eligible for first-time deposit bonuses of $200 and $1,000. To be awarded $200, you should deposit a minimum of $1,000 to your new account and execute at least 6 forex trades with a minimum notional value of $3.3 million AUD, Equity CFDs with a minimum notional value of $90,000 AUD, or on all other CFDs with a minimum notional value of $660,000 AUD. The notional value amount is higher for a $1,000 bonus, with a minimum deposit of $7,500.

On City Index, you’ll get both fixed and variable spreads which depend on the currency pairs. The supported number of currency pairs exceeds 80! So, for example, the minimum spread on AUD/USD conversion is 0.5, while the average is estimated to be 0.73. The leverage is set at 50:1 by default, but, depending on your needs and expertise, you can trade higher than that.

Let us walk you through the registration process for a City Index forex account. First, you fill out an online application form on the official website for the type of account you wish to open (more on that below). You provide your full name, address, date of birth, and other contact information. You can use your passport, driver’s license or even your Medicare card for verification. You’ll be asked about your previous trading experience. The last thing is to log into your account and fund your account via credit/debit cards, wire transfer, or BPAY.

Depending on the trader you are you can choose between a Personal account as the perfect choice for individual traders, a Self-Managed Super Fund (SMSF) account to manage your own super fund by providing more personal information to prove you’re eligible, a Corporate/Trust account if you can verify that you’re a corporation, and a Joint account if you’d like to share your account with a (business) partner. For the last one, both parties are required to provide suitable documents.

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Saxo Markets logo

3 / 5

10. Saxo

ASIC regulated: Yes.

Minimum opening deposit: $3000

Support: Email, phone, and live chat.

Platforms: SaxoTrader Go and SaxoTrader Pro.

Saxo Bank Group is a fully regulated Danish bank that launched its trading platform Saxo Capital Markets in 1998. Until now, users from more than 170 countries have been continuously using their services.

Saxo Capital Markets was launched in Denmark in 1998, as a trading platform part of the Saxo Bank Group. Since then, the company has earned the trust of thousands of customers from more than 170 countries worldwide. This comes as no surprise once you learn that Saxo adheres to the financial laws of 15 different jurisdictions, Australia being one of them.

You can create a Classic account with a minimum deposit of $3,000, Platinum account with $50,000, and a VIP account with $1,000,000 if you’re a high volume trader. The last two feature a private relationship manager, tighter spreads from 0.3 to 0.7 pips on the most prominent currency pairs, and lower commission fees.

You should also know that Saxo charges a 1.34% transaction fee on credit cards and 0.93% on debit cards for funding your account. You need the deposit details to create an account, as they’re part of the information you provide when signing up together with your name, address, date of birth, contact details, and government-issued ID.

On Saxo Capital Markets, you can trade forex, CFDs, bonds, and equities, with over 35,000 financial instruments. Although some traders might miss the MetaTrader 4 platform which isn’t supported by the broker, their native SaxoTrader platform can be used across all types of devices.

The SaxoTrader Go gives you access to research data, market news and trends, a variety of charts and real-time price updates. You can use all this to improve your trades and increase the chances for profit. The easily navigable platform can be accessed from your computer, Mac, smartphone or tablet. All your preferences and settings are saved even if you constantly shift between devices.

The second platform, SaxoTrader Pro, is suitable for advanced traders, professionals with experience and knowledge of the industry. The tools offered are more complex and unnecessary for beginners. The interactive interface allows you to open, close, and edit positions using the charts. SaxoTrader Pro can be used on Windows and Mac only.

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Forex graph

How to Find the Best Forex Broker That Suits Your Needs

When you have a lot of forex brokers to choose from, keep in mind that a trustworthy and fully functional broker is always regulated by a financial authority, has a user-friendly interface, different options for new and advanced traders, low fees and first-time deposit requirements, and provides quality support for its customers.

Regulations

Those of you on the lookout for a reliable forex broker should start with those that are regulated by an authoritative financial institution. The Australian financial industry relies on the Australian Securities and Investment Commission (ASIC) that’s also in charge of customer protection. It’s the place to turn to if a broker tries to trick you and abuse your customer rights.

As soon as forex trading became popular not only on institutional but on retail level as well, financial regulatory agencies around the world came knocking on the door. There’s now a list of standards that brokers have to comply with when operating within the jurisdiction of these regulatory bodies, such as having separate accounts for customers and company’s funds. The idea is to prevent brokers from misusing or spending the customers’ trading money in cases of security breaches or repaying their debts.

Therefore, a friendly piece of advice to all the beginners among you – stick to an ASIC regulated forex broker to avoid scams and hazards.

Platform Performance

It’s very important for brokers to have an easily navigable and user-friendly platform to make your trading as smooth as possible.

Sometimes you would be required to download special software to be able to run the platform on your computer. This, in turn, limits your trading to that device only. Other brokers have a web-based platform where your only prerequisite is a stable Internet connection and a web browser. The most popular forex brokers make their platform available via apps on smartphones and tablets.

Look for platforms that feature a variety of trading tools and charts to analyze the market and speculate on future price movements. This includes things like economic calendar, pip calculator, news streams, and the option for making instant trades.

Commission

Most traders consider trading fees as a determining factor when choosing their platform and we’ll cover those costs later on in the guide. However, with forex trading, it’s more important to check the commission and the spread added per trade. Most of the brokers exclude commission but then offer a higher spread to compensate.

Account Types

Brokers aimed at beginners typically feature low minimum deposit requirements and support placing small trades. Advanced brokers that cater to the needs of experienced institutional traders usually have a higher initial requirement.

Make sure you always check the rules for deposits and withdrawals as some platforms might charge extra fees for these services. You also want to know the time it takes to process withdrawal requests since this can range from one to three days. You don’t want to wait until the last moment only to find out that your payment will be delayed.

Customer Service

Since the forex market is open 24/7, you want to make sure that the broker of your choice offers support 24/7 as well. You can check the support page on their website (they must have one, or else give up on that broker altogether) and see whether there’s a space reserved for support tickets, an informative FAQ section, a variety of guides, and multilingual support. Do they provide email support and are they responsive on social media? Do they have a phone line and a live chat for urgent customer queries and do they offer localized support numbers too? Reading some online reviews can also help you get a better picture.

Additional Services

From time to time, brokers need to bring fresh ideas on the table if they want to stay in the top ten and be leaders in the business. That’s why they strive to provide a wholesome experience for their users by including services that aren’t featured across every single broker on the market such as in-depth market analysis tools, market commentary, consultations with experts, research materials, social trading support, free trading alerts, discounts and bonuses for loyal customers, etc.

What Are the Benefits and Risks?

Forex trading is definitely not all roses. Take a look at the following list of commonly associated benefits and risks.

Benefits

  • It’s the largest financial market in the world: On average, $5 to $6 trillion are traded daily on the forex market worldwide! This makes it the largest financial market in the world, a title the market isn’t planning on losing any time soon. To illustrate the size of the market, we’ve checked the daily trading volume of the largest stock market in the world, the New York Stock Exchange (NYSE), and it’s only around $22.9 billion.
  • The forex market is open 24 hours a day, 5 days a week: Unlike the stock market, the forex market doesn’t close at the end of the day but runs around the clock instead and shifts to different financial centres, from Sydney to New York and back the next day. It only closes down during the weekends, giving traders plenty of time to leverage market prices.
  • You need a small start-up capital: Compared to other types of trading, forex trading makes it possible to make high profits with small initial outlay. Most brokers set a 1,000 minimum, but there are some brokers who decide to set it as low as 500. This makes forex trading accessible to the average trader, although this by no means guarantees instant success.

Risks

  • There are numerous systematic risks that affect prices: The forex market is also among the most volatile ones and currency prices can move up and down quite frequently because they’re affected by a lot of factors such as inflation, employment figures, interest rates, elections, geopolitical conflicts, natural disasters, as well as tax and regulatory changes.
  • Limited protection: Unfortunately, the forex market is still largely unregulated and therefore not sufficiently protected. Conditional stop-loss orders can offer limited protection against some of the risks.
  • Increased spread size: In times of low liquidity, brokers can decide to increase the size of their variable spreads that change in relation to market changes. Try finding a broker with fixed spreads to avoid this.

How Does Forex Trading Work?

Forex is a global market where traders exchange currencies and make a profit out of the change in value between them. Although highly volatile, forex trading still remains attractive to traders who like the thrill of capitalizing on the fluctuating prices.

A big part of forex trading is CFDs or contracts for difference, where traders place their trust in the underlying currency and speculate that the value will increase or decrease during the course of the contract. Translate that to forex and you have traders who instead of buying a currency, make an agreement with the broker to earn their share if the desired change in the exchange rate takes place. If it doesn’t, they can lose a lot of money.

Since forex trading involves selling one currency and buying another, the currencies are always quoted in pairs. The currency that’s listed first is called the base currency, while the second one is called the quote currency. The forex pair price shows how much of the base currency is contained in the quote currency.

For example, USD/AUD is currently trading at 1.4925, which means that one US dollar is worth 1.4925 Aussie dollars. If the US dollar rises against the Aussie dollar, so will the pair’s price, and vice versa – if the US dollar drops, then the pair’s price decreases as well. So, what should you do as a forex trader?

If you think that there’s a great likelihood for your base currency (USD) to strengthen against your quote currency (AUD), you should “go long” or buy the pair. If you believe the opposite is more likely to happen, you should “go short” or sell the pair.

However, it’s important to understand that you don’t actually own these currencies during the time that your position is open. Forex trading is considered a derivative, a kind of contract that derives its value from the underlying currencies without the involvement of a physical transfer.

The majority of these contracts are large since the minimum trading amount is around 1,000 units, i.e. $1,000 or 1,000€ because of the tiny changes in the currency pair exchange rates. Trading high volumes is necessary for the trade to result in any significant profit or loss. That’s why it’s a good idea to look for brokers that support margin trading.

The volatility and unpredictability of the forex market are the main reasons why this type of trading is recommended to experienced traders who can calculate the potential risks and benefits without being falsely tempted into opening new trades. The forex brokers provide additional aid through their trading tools, research data, and sophisticated order options.

What Fees Will I Be Paying?

Similar to share trading, forex brokers impose certain fees for using their services in return. Before you start trading on any platform, familiarize yourself with the following fees/money requirements:

  • Margin requirement: To open a forex position, the broker requires a small amount of your capital as a sort of deposit or collateral. The average percentage is 0.5% or 1% of the full position size, also known as “Notional Value”, although this tends to vary across different brokers. For example, if you want to buy $100,000 worth of GBP/USD, and the margin is 1%, you can spend only $1,000 which will be “locked up” until the trade’s completed.
  • Commission: Some providers incur a commission fee per trade which tends to be pretty low, with just a couple of cents per thousand dollars. There can also be additional fees for credit/debit card payments.
  • Spread: The spread refers to the difference between the bid and the ask price of the currency pair. Instead of charging a commission fee, some brokers include this into the buying and selling prices of the pair you wish to trade. The spread is measured in pips.

Frequently Asked Questions

A percentage in point, or Pip for short, refers to a unit of change in the exchange rate of a currency pair. Generally, major currencies are priced to four decimal places, so a pip denominated the fourth decimal place of a currency, i.e. the number 3 in 1.7553. For example, if our currency pay is EUR/USD and the current exchange rate changes from 1.2450 (1 EUR = 1.2 USD) to 1.2455, the price ratio has increased by 5 pips.

Stop-loss orders are conditional orders used to minimise your risk when trading forex. It refers to an agreement between you and your forex broker to place your order when it reaches a predetermined price. This way, you can reduce potential losses if you’re not able to sit in front of the computer and pay attention to price changes yourself.

The most commonly traded currencies are (in no particular order): the US Dollar, the Euro, the Great British Pound, the Australian Dollar, the Canadian Dollar, the Japanese Yen, and the Swiss Franc.

The foreign exchange rates can be affected by various factors such as the demand to supply ratio, interest rates, inflation, changes in economic and political conditions, and consumer confidence.

About The Author

James Page

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James is the main editor. With a passion for finance and anything blockchain, cryptocurrency is right up his alley. He's responsible for most of the content on the site, trying his best to keep everything up to date and as informative as possible.