Foreign exchange trading attempts to make a profit by predicting the value of one currency compared to another.
FX trading is normally conducted through ‘margin trading’. A small collateral deposit worth a percentage of a total trade’s value is required to trade.
Trading in international currencies requires a huge amount of knowledge, research and monitoring. Before you put your money on the line, get independent advice from a licensed financial adviser.
In forex trades, spot and forward contracts on currencies are not guaranteed by an exchange or clearinghouse. In spot currency trading, the counterparty risk comes from the solvency of the market maker. During volatile market conditions, the counterparty may be unable or refuse to adhere to contracts.
Forex software programs are available for forex trading. They may claim their programs can let you know when to make trades. But no person or program can ever accurately predict movements in foreign currencies. Be wary of companies promoting a particular product that gives you access to better exchange rates or easy money. They may…
Transaction risks are exchange rate risks associated with time differences between the beginning of a contract and when it settles. Forex trading occurs on a 24-hour basis which can result in exchange rates changing before trades have settled. Consequently, currencies may be traded at different prices at different times during trading hours.
In forex trading, leverage requires a small initial investment, called a margin, to gain access to substantial trades in foreign currencies. Small price fluctuations can result in margin calls where the investor is required to pay an additional margin. During volatile market conditions, aggressive use of leverage can result in substantial losses in excess of initial investments.1
Contracts for difference (CFDs) are a way of speculating on the change in value of a foreign exchange rate. CFDs can also speculate on a change in share price or a market index. You’re not buying the underlying asset, just speculating on the price movement. CFD leverage is like trading with borrowed money. The deposit (or…
Different forex products involve different risks. Read the product disclosure statement (PDS) carefully before investing. Check that the forex provider has an Australian Financial Services (AFS) Licence. ASIC Connect’s Professional Registers will tell you if they do.
