Australian forex trading is not much different from trading in different parts of the world. But one of the main advantages is that it wakes up ahead of all the countries in the world and gets to react to the market conditions every week, before anyone else. So if something big happens somewhere in the world over the weekend, the effects of that on the market would be first seen in Australia even before any of the markets get to realize what is going on. In that aspect, Australia does have a special place in the trading markets.
Is Trading Forex in Australia for You?
As said before, Australia does have its unique characteristics as far as the trading world is concerned and likewise, it has its drawbacks as well. As Australia is in a time zone that is far ahead of the rest of the world, the Australian forex traders likely miss a bulk of the action during the UK and US market times. Those in forex trading would know that the volatility and the liquidity in these markets are the highest when the European and the US markets are open but when both the markets are open at the same time, most of the Australian traders would have shut shop and gone to sleep. Those who are awake at that time would have to deal with having to trade at odd hours.
Also, if there is not much happening in the markets, then the Australian daytime is generally very slow as far as trading is concerned. The volatility is low and the liquidity is low when the Australian traders come to their desks in the morning as all the other markets are closed. This is likely to lead to very dull trading at the start of the day for the FX traders and this is something that they need to get used to. They cannot do much and so the strategies and the time that they spend in trading should be adjusted in such a way that they can make maximum use of the limited opportunities that they are likely to get while trading. But this could be an advantage too as no other markets are open at that time and so it is only the Australian traders who are basically reacting to the news and things that happened in the previous day. So, the trading flow would not be interrupted by any other news or any markets in any other parts of the world and so the Australian traders, in the first half of their day would be in their own world and would be able to trade a slow market. If you can come up with a good strategy for tackling this market, then it is likely that you are going to do well as it is unlikely to be interrupted by anyone else.
Tips for Forex Trading in Australia
if you are forex trading in Australia, as mentioned earlier, you need to be quite alert to the possibilities. There aren’t likely to be many in the slow and steady markets during the day and so in such situations, it is very likely that the traders might lose interest in forex trading and the forex platforms and so switch to trading other instruments that are more liquid during the course of the day. It is indeed a difficult time for Australian traders especially for those who want to do day trading, basically open and close their trades during the same day.
In such situations, the traders must adapt to the prevailing trading conditions and make sure that their trading plans and their trading strategies are changed and made to suit the way the trading conditions exist in the country. If they still find it difficult to adjust their trading plans to that, then it may be good for them that they can stop day trading and switch to short-term or long-term trading. That would automatically lead to the traders using stop losses and take profits and limit orders as well which means that the trader can afford to be asleep when the trade is running.
If the trader chooses to do day trading, then he must stay awake, even during times of low liquidity either looking for opportunities to enter a trade or to close an open trade. If during such times, the market is very slow, then it can get very frustrating for the traders. So, in such situations, if they can adapt their strategy to go for short term or long term trades, then it is likely to become easier for the traders as they can do their analysis in such a way that they put in limit orders instead of markets order with appropriate stop and take profit orders which means that they can go about their work and can even go to sleep peacefully at night knowing that their orders would get triggered at appropriate points of time as long as the market comes to their order price.
These are some of the methodologies that can be used while trading in the region but again, it is up to what every trader is comfortable with doing. Any kind of thing can be done and any number of plans can be done but as long as the trader is unable to execute it every single time, then there is not much use for the same. So, it is important that the trader, first of all, comes up with a solid plan and makes sure that the plan works and as long as he knows that the plan works, it is important that he keeps plugging at it and executing it every single time.
Best Time to Trade Forex in Australia
The Australian forex market starts at a time when most of the world is asleep. That can be a boon and that can be a curse as well. It is a boon as the Australian traders have the entire market for themselves for a few hours before the Asian markets begin their work and so they basically control the liquidity and volatility during this time. But it can be a curse as well as none of the Australian traders (except maybe the very large banks over there) have the power to move the markets on their own which means that the moves are very slow and labored.
Of course, the most volatile currency during this time would be the Australian dollar, and especially when there is news from the RBA, then there are likely to be some good fireworks in the markets and the pairs which have the Australian dollar. Due to the low volatility and the lack of liquidity, sometimes the moves can be very fast and very strong as well and that is why it is important to avoid news trading during sessions like these so that you don’t get caught on one side or the other when news is released.
The best time to trade would be the time when you are comfortable with it. But if you want to know what the market is doing and also want to know what time the market dictates to you before you can decide on your own, then we would say that the time, as far as the Australian timezone is concerned, is not very conducive. As far as forex trading is concerned, which can be very risky at times, it is the time when both the London and the NY markets are open. It is a window of around 3-4 hours but it is quite late in Australia at that time. This is the time when the liquidity is very high in the forex markets and so the volatility is also pretty high during this time. Many opportunities are available for trading at this time, both for day trading and other types of trading as well and it must also be remembered that a lot of important news, that affects the markets, also gets released around this time and this can bring in even more volatility to the markets. So, if you can adjust your schedule in such a way that you can be awake at this time and full of energy as well, then this is the best time to trade.
But note that you not only need to be awake but you also need to be fresh and raring to go. Trading is a very challenging profession and it also involves trading CFDs which are very risky to trade and where there is a lot of possibilities that you might lose your account. So, your mind must be alert so that you can do proper analysis and also be alert to new opportunities that come up in the market during this time. It is better that you take a rest if you feel that your body or mind is not up to it at that time. Never trade when the body or the mind is very tired or weak as this is a sure recipe for disaster. Always trade when your mind and body are in sync and you really feel good about trading. There are 1000s of opportunities in the market and so another trade will always be there when you come back to the markets, Though the fear of losing out on an opportunity is likely to be very great, you need to learn to control that emotion and ensure that you trade only when you feel right about it. You can also alter your strategy in such a way that it suits you. As mentioned earlier, you could also go for short term or long term strategies so that you can set limit orders for entry and exit which means that you don’t need to be around when the trade happens and you can take good rest and the market and the orders will take care of themselves. Or you can change your trading plans in such a way that you would be able to make trades during the day even when the market is slow and less volatile. You need to remember that all it needs is only a few successful trades every month for you to be a highly profitable trader. You don’t need to make too many trades and your profits are not proportional to the number of trades that you make.
What Forex Leverage Limits are Available in Australia?
Like in many places of the world, there are no limits to the kind of leverage that forex brokers can offer to their customers. But in general, the retail traders in Australia seem to prefer a leverage of 500:1. Of course, there are also a variety of leverages available right from 1:1 to 1000:1 but the traders need to be aware of the risks and the advantages of each type of leverage before they request their broker for a specific kind of leverage.
For example, a leverage of 1:1 is the best that a trader should be looking for as it reduces the risk to a huge extent and helps the trader to stay safe in positions for long without having to worry about whether their account is going to get a margin call. But this kind of leverage is generally not suited for retail traders. The reason is that they generally begin their trading with a small account size and if they do trade with a leverage of 1:1, it means that they are likely to make very little profits with their strategy even though they may have a great trading plan. Though there is no doubt that this is the ideal margin that they should be using, it leads to impatience among the traders and hence they generally don’t use this kind of leverage. Only institutions and large traders generally use this type of leverage and they are more likely to survive in this market for long.
Retail traders generally prefer a leverage of 100:1 or more as it means that they have a higher chance of making profits. But what they don’t realize is the fact that the leverage is a double-edged sword. While high leverage can give good returns, it can also lead to quick and big losses as well which means that the trader’s account is very likely to margin call even with a small move in the market. That is why the retail trader must understand what he is getting into, designs a trading plan to take into consideration all these kinds of risks as well. Only then will the trader be able to survive the challenges posed by such high leverages and continue to trade profitably during his trading career and as his career progresses and he continues to make steady profits, he should continue to reduce the leverage that he uses so that he can continue to trade safely for a much longer time than usual. The more time that he spends in the market, the more will he be able to learn and in that manner, he will be able to get better as time rolls by.
How to Become a Licensed Forex Broker in Australia?
The Australian Securities and Investments Commission is the boss in Australia as far as the forex brokers are concerned. The ASIC is the regulatory authority and is known to keep this industry under very tight control, especially in recent years. About a decade back, they were pretty lax in implementation of regulation and doled out licenses by the dozens and this led to a large number of forex brokers flocking to Australia in search of licenses which they managed to get and since the regulation was very lax at that time, they misused the licenses and the regulations to scam many people out of their hard-earned money.
This continued for a few years which led to the ASIC and Australia getting a very bad reputation among the forex traders. It was only a few years ago that the ASIC decided to turn a new leaf and since then, it has been watching all the licensees like a hawk. It has taken some very strict action against erring brokers and has worked doubly hard to clean up the system and the regulations which were in a mess. As a result of this, over the last few years, it has been able to get back some of the lost reputations and it is now very clear and well known in the forex circles that the ASIC is one of the most strong regulators around the world which brooks no-nonsense. So, if any broker does get licensed with the ASIC, then they are considered to be a very good broker who follows all kinds of regulations in a very strict manner as set out by the ASIC. So, if you want to open an FX brokerage and get it licensed by the ASIC, be ready for tons of documentation and a lot of scrutiny and months of waiting as well, as the ASIC goes through verification of all the documents that you have submitted for the license. Even after the forex broker receives the license, there is a large set of regulations that the broker has to strictly adhere to so that they can continue to carry on the licensed business in Australia.
Forex traders in Australia have a wide range of choices including a variety of Australian forex trading platforms to choose from. Sometimes, we may also say that they are likely to be spoilt for choices. It can be good at most times but, during some special times, it can be bad for the trader as well as unless he makes the right choices. He may end up with a bad broker and end up losing his entire account within a short span of time.
So it is important that the trader chooses the right platform and also has the right trading plan so that he can succeed just as much as the other traders in different parts of the world would do so. Being the first country that opens up for trading at the start of every week can be both a boon as well as something difficult to deal with. The trader needs to keep this in mind and organize his trading plan in such a manner that he turns this to his advantage and makes full use of the time that he can spend on trading when the whole world is asleep so that he can make profits slowly and steadily.