There are many Australian forex brokers for you to choose from, but there are several factors you have to consider before you settle on one of them.
The Spreads You Get
The broker’s spread is calculated in pips and is the variance between the price at which you can buy a currency and the price at which you can sell it at some point. Most Australian forex brokers do not charge commission on trades and this difference is how they earn their income. The difference in spreads varies from one broker to the next. You need to find a broker who offers lower spreads as it will save you money.
The Tools Australian Forex Brokers Offer
Forex brokers offer different trading platforms which feature real-time news and data, real-time charts, tools for technical analysis and some of the brokers offer support for the trading systems. Brokers normally also provide you with fundamental and technical commentaries, forex calendars and other forex related research. Before you commit to one broker, request a free trial to the trading platform. You should look for a broker who will offer you what you need to be profitable and succeed in the market.
Finding a Reliable Broker
Forex brokers are normally linked to large lending institutions and banks due to the high levels of capital that is required. Ensure that your potential forex broker is registered with the Australian regulatory board ASIC. You should ensure that you have the backing of a reliable institution.
The Use of Leverage
It is necessary for you to use leverage in forex trading as the profit sources are so small. Leverage is indicated as a ratio between the total available capital and the actual capital. It is the amount of funding your broker is willing to lend you to allow you to trade. A ratio of 100:1 indicates that your broker is willing to lend you $100 for each $1 of your own money. Brokerages often offer leverages as high as 250:1 or 400:1. If you do not have much capital to commence trading, you should opt for a broker who offers you higher leverage. If your own investment is not a problem, you should ensure that your broker offers a range of options as far as leverage goes.
The Different Account Types You Get
Brokers generally offer at least two account types, with some of them offering more. The smallest of these accounts is the mini and requires a minimum of around $250 with high leverage being offered. You will need high leverage in this case because your initial capital is so low. The standard account type offers different levels of leverage, but requires capital of around $2000. Premium accounts require high amounts of initial capital, but you will be offered various levels of leverage along with other services and tools.
What You Need to Avoid
Strict Margin Rules
When you use leverage, your broker has some control over the level of risk you choose. This means that your broker can buy or sell your positions at its discretion which is not always a very good thing from your perspective.
Sniping is a method used by brokers to buy or sell positions prematurely when it reaches as near as can be to the preset points. This increases their profits.
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