February 17, 2014

Things to Consider on Australian Forex Brokers

How to Pick Australian Forex Brokers

This article explains some important things you have to consider when choosing Australian forex brokers.

As an individual investor in the forex market, you will need the services of a forex broker to facilitate your trading activities. Your success as a forex trader depends a lot on the forex broker that you choose so you should take this exercise very seriously. There are many Australian forex brokers in the business so finding one should not be a problem. However, there are certain things that you must consider to ensure that you choose the right forex broker. Forex trading will involve you investing your hard-earned money so you must ensure that you get the best deal possible.

Since you will be paying for the services of a forex broker, you must consider how much it will cost you to get the quality services that you need. Australian forex brokers, just like their counterparts from all over the world, make their money mainly through the spreads they offer. The spread refers to the difference between the ask price and the bid price for any currency pair. It varies from one broker to another and the difference can be very significant. Some forex brokers will also charge a commission on each trade order that they execute on your behalf. You will have to confirm all these and any other additional charges that may be in place.

In forex trading, the spread is given in units called pips. A pip represents the smallest movement in the forex rate given to the fourth decimal point. It can be used to show the spread and also gains or losses when currency rates change. In forex trading, wider spreads favour the forex broker while tight spreads work to your advantage as a forex trader. Your aim is therefore to find the right balance, which might not necessarily mean choosing the forex broker with the tightest spreads. An average spread of five pips is considered suitable enough for both parties.

How to find Australian forex brokers

Many Australian forex brokers run their business online and this is where you will find most of them. As a forex trader, you need to have good internet connection. Changes in the forex market happen with every passing second so it helps to have all processes running smoothly and swiftly. You would not want to miss out on any profitable trades due to a slow internet connection. It also helps to deal with forex brokers based in your country. As already mentioned, forex brokers offer different spreads for the same currency pairs. Australian forex brokers are more likely to offer favourable spreads for currency pairs involving the AUD as compared to forex brokers in other places like the UK or USA.

Forex brokers can help you execute big trades that will bring huge profits even if you do not have a lot of money in your trading account. This is done through leverage, which is some form of a loan. The degree of leverage offered depends on the amount you have in your forex trading account, your trading history and the maximum limit offered by the broker. Leverage can be as low as 30:1 on the money you have in your trading account or as high as 500:1. This is an incredible opportunity to make huge profits using money you do not have but it also comes with an increased risk.

You have to be careful with leverage as you may lose the entire amount you put in and any other losses suffered before the broker was able to close your bad trading position. You will eventually bear the costs of all the losses and this can result in you losing your entire investment all together.



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