A Helpful Guide to Forex Trading and the Best Australian Forex Brokers
Like many other countries across the globe, Forex trading has become a very popular form of investment for a growing number of Australians. Countless people, from the average Joe to top ranking business men, are finding it exciting and often times a profitable adventure. It is, on the whole, an unregulated market with very few limitations, and with a trading volume in excess of USD$5 trillion there are plenty of opportunities for all kinds of traders. And these aren’t the only reasons it has taken Australia by storm. Trading is possible 5 days a week round the clock, and liquidity depth and size is definitely appealing. Even on a bad day for the foreign currency markets there is a chance to turn a profit, provided you can pick the right direction for the market to go.
Unlike the stock markets, there is no central exchange or clearing house for executing transactions, which in the past has led to a few instances of malpractice and manipulation. Nowadays, however, this very rarely happens thanks to the hard work and dedication of a number of regulatory bodies. In Australia, the licensing and regulation of the Forex market falls on the shoulders of ASIC (Australian Securities and Investments Commission).
| Broker | Bonus | More |
|---|---|---|
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$30 Non-Deposit Bonus | Review |
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$5000 | Review |
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N/A | Review |
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50% | Review |
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40% | Review |
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$50 | Review |
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$100 | Review |
The ASIC and Forex trading
Many countries around the world have their own local regulatory body. Take for instance, BaFIN in Germany and the FCA in the UK. In Australia, regulation of businesses providing providing financial services falls under the responsibility of the Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulatory Authority (APRA). For financial services such as Forex trading it is ASIC which is the relevant body, as it is responsible for market integrity and consumer protection and the regulation of investment banks and finance companies. Rather than deal with such a responsibility themselves the regulatory system has devolved into oversight by a number of External Dispute Resolution schemes (EDRs). One of which is the Financial Ombudsman Service (Australia), which receives more than 30,000 complaints every year.
We should point out that there has recently been a crackdown on retail over the counter derivative providers. Those who are looking to expand their client base by attracting new customers for the trading of complex and risky products such as binary options and foreign currencies. There was a recent report, written by ASIC, that highlighted increased activity among licensed and other participants via online platforms and websites offering their financial services to investors in Australia. It was found that many of them had little or no authorisation or indeed the correct type of license. Many of the operators decided to co-operate with ASIC and take remedial steps to ensure they weren’t offering financial services for Australians until the appropriate licence had been obtained.
The importance of choosing an ASIC regulated and licensed Forex broker
There are lots of reasons you’re better off choosing a licensed and regulated Forex broker. But, in order to show you how important it can be we are able to draw on a real life event that proved how quickly things can go wrong for brokers and their traders. January 2015, saw the Swiss National Bank make an unexpected decision, when it removed a cap on its exchange rate. The cap had been there in order to prevent the Swiss franc appreciating too much in value. The Swiss franc had always been seen as a safe haven and if it became overvalued it would make the country’s economy uncompetitive and severely restrict its growth. As soon as the cap was lifted there was an immediate increase in the value of the Swiss franc against the Euro by 30%. Needless to say, Forex traders who had their share of Swiss francs made an absolute killing. However, there were a number of other traders on the other side of the equation left scrambling to recover their losses. Some of the world’s largest foreign exchange brokers found themselves looking at millions of dollars in losses.
For those traders who had chosen to trade with an unregulated broker it was disastrous, as a number of brokers ended up going bankrupt, and therefore their own funds could be used to repay any of the brokers debts. Those who had chosen a regulated broker were in a much better position as it meant their funds were safe because they were kept in segregated accounts and thus safe from the bankruptcy.
Now you appreciate how important it is to choose Forex brokers in Australia that are regulated, let’s share some of the other important factors you should consider.
What to look for in the top Forex brokers in Australia
So, let’s say you’ve found a Forex broker in Australia that is licensed and regulated by ASIC. Or maybe you’ve found a broker which has its base of operations in another country but also has a licence to operate in Australia. How can you decide which is the best Forex broker to give your dollars to? Take into account a number of other important factors, along with your own personal preferences and you’re sure to find a winner. We will, of course, mention these factors when writing our reviews but you might be interested in case you’re doing some of your own research. Other important factors to consider include:
Security
It’s advisable to consider the trading platform available, and preferably pick a broker offering one of the best available. These include MetaTrader 4 and MetaTrader 5, along with a number of other proprietary platforms offered by the best Australian Forex brokers. Also make sure the platform available can be used on mobile and smartphone devices. You also need to check encryption of data and safety of your funds. Ideally, it should be ‘Multiple Layer SSL Encryption’ which offers the highest protection for your money and personal details.
Communication
It is highly likely that at least once you will need to get in touch with your broker. Therefore, you should be looking for one that maintains top quality communication with its clients. This doesn’t just mean you have a telephone number or live chat option, but depends on how quick they respond to any queries and how helpful the representatives can be. It will be excellent if there are a number of different options including telephone, fax, email and instant chat options and a good thing to look out for as well is a wealth of educational material. After all, you never stop learning when it comes to Forex trading.
Fees
How much your broker is going to charge is always going to be an important consideration, as any charges they make will eat into your profits. Most brokers make their income by way of the spread, so it would make sense to look for a broker with the tightest spreads possible. 4 pips on your investment is about the maximum, before it starts making a substantial difference. Leverage is another aspect worth being very careful with, as some offer what looks like a very attractive offer. Ideally, you should be looking at leverage of no more than 100:1, as this will help you to make a reasonable amount of profit, without worrying too much about severe losses if your trade ends up being a losing deal.
Accounts
If you’re just a beginner it’s very likely your trading capital is a little on the small side. Therefore, you should be looking for a broker that only requires minimal initial deposits to open a trading account, such as $25 or $50. This means you’ll be able to start trading without your trades burning a hole in your pocket.
Reliability
A good way to learn about the reputation of a broker is to read a good selection of reviews. You can also glean information by joining various Forex trading forums and discussion websites to see what other traders are saying about particular Australian Forex brokers. We always advise new traders to carefully read the terms and conditions and not be too hasty about opening an account until you’ve read and understood them. The terms and conditions will give details of any hidden charges and fees, and will also explain the requirements should you be taking advantage of any Forex broker bonuses or want to make a withdrawal from your trading account.
Demo account
Nearly every broker will offer this option, and it really is a good one to take advantage of before risking any real money. There may be a limit relating to the time you can use an account, but in general you’ll find it’s about 30 days. Trading in the virtual world is a great way to find your way around a trading platform and how a broker can help you trade. It also helps to refine your trading skills and be fully equipped for when the time comes to start live trading.
Bonuses
Bonuses can be great for beginners and more experienced traders alike. It pays to keep a close look out online, as there are often some very attractive offers. Bonuses are a great way to boost your trading funds, but don’t forget to read those very important terms and conditions. Otherwise you might find you can’t get at your profits or make any kind of withdrawal.
Deposits and withdrawals
When it comes to making payments look for top Forex brokers in Australia, try and find those that will allow you to make payments in Australian dollars. Forex trading involves making money from the rise and fall in the value of various foreign currencies. You’re going to find your success seriously hampered if you’re constantly worried about fluctuations in the value of your home currency as well. And when it comes to taking your money out you want the best Australian Forex brokers who promise speedy withdrawals. With any luck you should be able to find one that will process this type of payment within 24 hours.
Can we make a recommendation for the best Forex brokers in Australia?
Sadly we can’t, because picking one is a very personal decision. We can make various suggestions, and give you tips on the factors you should be considering. But every trader is different, so what may suit one will not necessarily suit another. Let’s give you the important qualities you should be looking at once again before we finish.
- Reasonable leverage and tight spreads
- Reliability – Preferably one that’s been licensed and regulated by ASIC
- An intuitive and user-friendly trading platform that’s mobile friendly
- Promotions, special offers and bonuses
- Customer support and service of the highest quality
Once you’ve found a Forex broker in Australia that ticks most of these boxes there will be no need to look any further.