To start trading in the foreign exchange market, you need to open an account with a forex broker. You will have a wide choice of Australian forex brokers to select from, but you should bear a few factors in mind before you sign up.
What Should You Be Offered
The services brokers offer range from one broker to another. Some brokers offer more ancillary services than others and you should confirm what your package includes. You will be offered a trading platform to use for your trades. These platforms offer you real-time market news and data, charts and other tools that are required for effective trading. You will be offered support for the software they provide.
You should consider opening a demo account before you make a final decision on your choice of broker. This will allow you the opportunity to test the trading platform and determine if it is suitable for your trading strategy and style. You should ensure that you obtain the most suitable software, spread and leverage before you sign up with a forex broker.
Most forex brokers have a link to one of the large banks or financial institutions. This is because of the large capital accounts needed to make it possible to provide suitable leverage to their clients. This is not necessarily a bad thing as they will be able to offer you tighter spreads which makes it worth your while to consider signing up with one of the larger brokerage firms.
You should confirm that your forex broker is registered with the ASIC, the Australian Regulatory body. This will give you some form of protection in case of a declaration of bankruptcy. The information regarding the registration should be available on the broker’s website.
Australian Forex Brokers Account Types
Most forex brokers offer at least two different types of accounts. There are those who offer additional accounts. The smallest account type you can access is called a mini account. With this account you need to invest at least $250 as a minimum deposit, but you will require high leverage ratios. You will need the high leverage levels in order to make a suitable profit because the investment is so small.
The other account you can open is a standard account. This account will normally offer you different levels of leverage. To open this type of account, you may have to make an initial investment of around $2000. Some brokers offer a micro account, as well as a premium account. The premium account requires much higher deposit amounts, but you will be offered additional tools, services and leverage.
You should confirm your broker’s margin rules. When you are given the opportunity to trade with borrowed money, your broker will have the final word as regards your risk level. This means that your broker will have the authority to buy and sell your trades at their discretion. This may not always be to your benefit.
The spread is the difference between the cost of buying a currency and the cost of selling a currency at a specific time. This difference in prices is how Australian forex brokers earn their income. Unlike the stock market, foreign exchange brokers do not charge commissions. The variance in spreads differs from one broker to another.