In order to begin trading on the foreign exchange market you will be required to open a trading account with a forex broker. In order to determine which of the many Australian forex brokers is best for you there are some considerations to be made.
The size of the brokerage
The majority of forex brokers have an association to either a large bank or financial institution. This is due to the large amounts of capital one requires in order to provide adequate leverage to their clients. This is not always a disadvantage as they may be able to offer tighter spreads and tighter spreads can be advantageous to your trading.
It is important to verify a forex broker’s registration with a regulatory body before registration. The reliable Australian forex brokers will be certified by the ASIC providing the trader with protection should the brokerage face bankruptcy. One can find this information on the relevant forex broker’s website.
The services to be expected
Different forex brokers will offer various service facilities. It is important you confirm what the brokerage is offering you before signing any policies. One feature that all brokers must offer is that of a forex trading platform. These platforms will present with real time market news releases and data, forex charts, forex signals and any additional tools which may be required for effective trading. The broker must also offer customer support for the different software provided.
It is recommended that all beginner traders open a demo account when registering with a forex broker. This allows one to not only test the trading platform but also determine whether it is suited to your trading strategy and type.
The different account types
The majority of forex brokers offer a minimum of two different accounts known as the mini and the standard account. There are those who offer additional accounts including a micro account, but they are not used by many retail or institutional traders.
The mini account is the smallest account type available as is favoured by retail traders. This account requires a minimum deposit of $250 but presents high leverage rations. The high leverage levels are noted as a means of incurring advantageous profits using the smaller investment capital. However, utilising high leverage places greater amounts of risk on the trade making the mini account a riskier type of account to purchase.
The standard account requires an initial deposit of $2000 and uses lower levels of leverage. This is due to the higher capital amount being sufficient to incur a profitable trade without the need for leverage.
The Australian forex brokers margin rules
It is important to determine the forex broker’s margin rules before deciding on a broker. The broker will always have a final say on your opportunity to trade with borrowed money giving them the authority to buy or sell your trades at their discretion. This can sometimes benefit you, but at other times can be to your disadvantage.
The size of a spread
The spread of a trade is the amount on which your forex broker earns his income. It is the difference between the currency purchase price and the currency selling price. It is important to identify this amount before deciding with a broker to determine whether or not you are getting the best deal.