Trading currencies can be a great way for Australians to make a decent amount of money as a side hustle. Whether through an exchange that allows customers to place their trades or through online trading currency software, traders can go long or short in a market that’s always open 24/7. However, considering most financial instruments in Australia, currency trading has risks, and the whole process can be a tad complex for newbie traders. But don’t worry! This article highlights the critical things to consider when trading currencies online.
1. Fees and Commissions
While it may seem like a simple transaction, the fee structure can make or break the experience. Fees and commissions are based on the amount of money Australians are trading with and how many trades they place per day, and they vary by broker and online trading currency platform. But they’ll also be affected by market conditions that the Australian foreign exchange regulates.
Most brokers offer a range of pricing options to accommodate different budgets and risk tolerances. For example:
Margin Interest: It is the percentage charged for borrowing money against the position (i.e., borrowing money at a 0% interest rate). This can be $5-$25 per round-trip trade, depending on which brokerage firm people choose; however, these rates can change daily due to market conditions such as volatility or economic instability around world economies like China’s recent downturns. This makes investing less attractive due to the high-risk levels associated with these investments. Besides, they require significant amounts borrowed against investments made over periods longer than one year at least half before being able to sell back into markets without incurring interest charges for any unforeseen losses incurred during this period.
2. Leverage
Leverage is the amount of money people have in their trading accounts. The more money they have, the more leverage they get. You can use leverage to increase profits and minimise losses, but it also opens up many opportunities for fraud and scams.
Leverage works by multiplying the amount of capital at risk by a certain percentage (the multiplier). This means that when using leverage, if one unit of currency has an underlying value of $1, then using 1:1 or 2:1 leverage would mean that two units would equal 3 or 4 USD, depending on how much leverage was used.
While there are benefits associated with using high leverage levels, such as greater profit potential with less risk involved, there are also risks associated with using high leverage levels. This includes losing all the money if something goes wrong during trading sessions!
3. Components of a Market Maker
A market maker provides liquidity to the market. They are the ones that make sure there is always a buyer and seller for any trade. Market makers don’t take on any risk; they act as a middleman between buyers and sellers to ensure smooth transactions.
Market makers have all types of roles within FX markets. They can be employed by brokerages, banks or even hedge funds. Some even act as dealers themselves (in which case they will be responsible for all aspects of trading).
4. Spreads and Slippage
Spreads and slippage are the costs traders will incur when trading currencies online. Both are unavoidable, but a trader can minimise them by using a broker with low spreads and good customer service.
The spread represents the difference between what the broker charges people to trade currencies (the bid price) and what they offer (the ask price). It’s their profit margin on each transaction. For example, suppose traders buy $100 worth of Bitcoin at market price (the ask). In that case, the broker will subtract their commission from its sale price before selling it to them for $99. Later, they will keep whatever profit margin remains after paying commissions and platform fees like deposit/withdrawal fees or foreign exchange charges from a trading activity like futures contracts or forex trades.
