The introduction of Contracts for Difference (CFD) trading into the Australian forex market approximately eight years ago threatened the revenue model of discount brokers because retail investors could now access the forex market via CFDs with minimal brokerage fees. Additionally, CFD market makers introduced innovations and new features, further upending the existing market order.
CFD providers introduced fees as low as $10 per transaction, in comparison with $20-30, which was standard at the time. The investing public and retail traders responded overwhelmingly to this choice! The earliest major players in the Australian CFD market were CMC Markets and IG Markets, whose popularity was attributable to their over-the-counter role as both market provider and trade counter-party. In response, discount share brokers created the ASX alternative, and listed exchange-traded CFDs, boosting interest in and knowledge of CFD trading in Australia.
The initial enthusiasm for the transparent ASX-based CFDs ultimately proved inadequate to sustain a viable market. The alternative market-makers model prevailed, and is the only available mechanism today, to the evident satisfaction of all traders. Market makers, like IG Markets, Xtrade.AU Online Capital Markets, and a few others guarantee that their clients can trade at globally competitive prices whenever markets in the underlying financial instruments are open.
Presently, there are more than 30,000 Australians trading CFD instruments, up some 400% in a decade! The interest in CFD trading in Australia--Contracts for Difference is based on their flexibility and efficiency as trading instruments. Among the most popular CFD markets today are:
FOREX – Foreign currencies are the world's largest volume of trading by asset class, providing liquidity and operating, 24/5.
INDEX – Stock indices, like– Australia 200, S&P500, the DAX, FTSE, and many others– represent compilations constructed to track national markets, enabling traders to gain exposure to and diversification of specific national market stock portfolios.
COMMODITY – With the rise of China as an industrial giant, interest in commodity trading has grown. From oil and gold, through other agricultural, metal and petroleum-based products, the growing CFD trade demonstrates that Australians are increasingly taking trading positions on raw and basic commodities with minimal margin and transaction costs..
CFD trading in Australia is justifiably well-developed, and Australian traders have several CFD platforms to choose from. The regulatory structure provided by the Australian Securities and Investment Commission (ASIC) is effective in creating a positive trading environment. Traders can choose from among several CFD platforms, based on offered services, reputation and reliability, convenience and ease of use..
Careful selection of your platform is the key first step in a profitable strategy for CFD trading in Australia. Ensure that your requirements are met and that you are comfortable with the environment so that the tools are in place for implementation of a winning trading strategy