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The Foreign Exchange Market (or ‘’Forex market’’) is the largest trading market globally with many countries permitting currency trading. However, some countries refuse the transactions of trading foreign currencies. These countries either have implemented rules that restrict trading currencies or have banned them outright. The good news is Australia is not included in those regions.
Regulations
Forex Trading is legal in Australia but is regulated with strict measures by the Australian Securities & Investments Commission (ASIC). They’ve been involved with the trade regulations of Australian financial markets since the early 90s, but since 2010 have changed their approach to accommodate global regulations standards. Australia’s financial sector is controlled at a top tier level. Opportunities to trade in the foreign exchange market are great for both seasoned traders and beginners alike who currently reside in Australia.
Basic Foundational Understanding
Having a concrete understanding of the basics is a must. This is not just in Forex trading but in all endeavours in life. Common knowledge states that nothing outweighs experience so it’s also advisable to begin familiarizing yourself with trading platforms, such as MetaTrader 4 (MT4).
A few crucial concepts to learn when starting include:
- What is Forex?
– The Forex market is a worldwide financial market where one currency is traded for another.– Foreign exchange is based on the exchange rate or the difference in prices between two currencies from two different countries.
- Currency pairs (Forex pairs)
– When Forex Trading, currencies are bought and sold. There are 8 widely traded major currencies, which include the Australian Dollar (AUD). The currency market, however, is structured through ‘’currency pairs.’’ Combined, there are a total of 7 major currency pairs and the United States Dollar (USD) is always traded on one side. While combinations of different currencies can be traded, a noticeable example would be AUD/USD, commonly known as the “Aussie dollar.”– The first currency listed in a currency pair is called the “base currency” or transaction currency. The second currency listed is called the “quote currency.”
– EUR/USD or the “eurodollar” is traded at a volume higher than AUD/USD “Aussie dollar”, making its liquidity
– Major currencies consist of the United States Dollar (USD), Euro (EUR), Japanese Yen (JPY), British Pound (GBP), Swiss Franc (CHF), Australian Dollar (AUD), Canadian Dollar (CAD), and New Zealand Dollar (NZD), which is commonly referred to as G8.
– The most actively non-USD currencies traded are GBP, EUR, and JPY. An important note is currency pairs not containing the USD are considered ‘’cross currency pairs’’ or ‘’minor currency pairs.’’
– Any major currency mixed with an emerging market is known as an “exotic currency pair.” These currency pairs are outside of the majors and are not traded as much, so transaction costs are often higher.
- Trading sessions (when to trade)
– The Forex market is open 24-hours/5-days a week. It’s broken down into 4 main sessions. In order from sun up to sundown, they include the Sydney, Tokyo, London, and New York sessions.
– Throughout the Forex market’s history, most traders have spent more time using the “Forex 3-session system” which comprises Asian, European, and North American markets or, the Tokyo, London, and New York sessions.
– The International Dateline ends the New York session and begins the Sydney session with the opening of the New Zealand financial market calling this change the “hand-off.” This is what allows for the market to openly thrive 24-hours, 5-days a week closing on weekends.
– The FX market is also closed on two official holidays: Christmas Day (Dec 25) and New Year’s Day (Jan 1). Any national holidays in their respective countries may have an impact in those regions resulting in weaker price fluctuations as well.
Professional Guidance and Practical Application
There are many tutorials, guides, podcasts, and webinars out there to help anyone build foreign exchange trading skills and start trading in Australia. With basic knowledge under your belt, you can open a demo account using trading software like the MetaTrader 4 platform and also the MetaTrader 4 app (enabling ‘’trading on the go’’). Practice step by step until you’re able to build a Forex trading strategy. Most successful traders started similarly on their way to becoming successful Forex traders.
It’s imperative to trade with a respected global Forex broker. FP Markets is a great starting point, and with their superior customer support, they’ll put you on a path of acquiring more in-depth knowledge and offer guidance on using Forex trading platforms. You’ll also learn more about key concepts like market conditions, price action, risk management, interest rates, and the volatility of exchange rates, just to name a few. When your confidence is at a level you feel comfortable with, consider opening a small live trading account.