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.
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…
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…
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.
Statistics show that most aspiring forex traders fail, and some even lose large amounts of money. Leverage is a double-edged sword, as it can lead to outsized profits but also substantial losses. Counterparty risks, platform malfunctions, and sudden bursts of volatility also pose challenges to would-be forex traders.
In basic macroeconomics courses, you learn that interest rates have an effect on countries’ exchange rates. If a country’s interest rates rise, its currency will strengthen due to an influx of investments in that country’s assets putatively because a stronger currency provides higher returns. Conversely, if interest rates fall, its currency will weaken as investors begin to…
