Online Trading In Australia For Beginners

The dramatic rise in the global forex market,  has also been reflected in the growth of online trading in Australia via online forex brokers. While the overall foreign exchange turnover in Australia declined in the half year to April 2015 by 4%, the Royal Bank of Australia reports that non-bank online trading in Australia (FX and currency swaps and options) by locals grew 52%

Analysts cite several reasons for this anomalous growth.

  • Most important is the rise in trading opportunities. With the availability of CFD trading in Australia, individual traders can now enjoy increased margin magnification on small sums, with phenomenal leverage of 400:1 or more.
  • The precipitous fall in the value of the Australian Dollar (AUD) has motivated Australians of all stripe and kind to hedge their informal and formal currency exposure.

Why online trading in Australia is so popular?

The rise of CFD online trading in Australia has been gradual, propelled by both market and regulatory forces. While initially the governing authority ASIC  (The Australian Securities and Investments Commission) pushed for exchange-traded standardized contracts, the efficiency of proprietary trading platforms proved to be irresistible. With increased recognition and approval, this channel has grown to prominence at the expense of other trading opportunities.  ASIC has remained pro-active, publishing numerous informative and educating position papers to help small traders understand and master the intricacies of CFD instruments.

Australian authorities are relatively progressive in their oversight regime compared with their major trading partners. Traditional conservative cautiousness in Japan and provisions in the United States Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 limit domestic traders to significantly more severe leverage constraints.

As alluded to above, the global economic environment underwent a significant upheaval in 2015, with a significant adverse effect on the Australian dollar.  The reliance on commodities in general and the Chinese economy in particular became unprofitable, amidst a Chinese-recession-inspired global slowdown.

Online Trading In Australia
The significant depreciation in the value of the AUD motivated new entrants in Online Trading in Australia.

Where to Start

  • A wealth of information to the beginning trader is available, online and offline.
    • Forums for investors with similar objectives and strategies
    • Subscribe to RSS and other push-feed updates from financial news and government monetary sites.
  • Familiarize yourself with technical price charts
  • Set realistic goals for your temperament, time commitment and expertise.
  • Practice with virtual accounts. The wide variety and choice of brokers and platforms present multiple opportunities to practice

Tax Treatment of CFD trading activity

Gains and losses incurred through CFD trading activity for Australians can be subject to a variety of treatments, largely dependent on the relation of the principal activity of the trader: business, capital gains investment, or gambling.

Unfortunately, the considerations as to classification are myriad and subject to interpretation beyond the scope of this article. You are therefore advised to seek competent professional tax advice, before claiming your proceeds or losses in one category or another.

Trading CFDs involves significant risk of loss. Trading FX/CFDs involves a significant level of risk and you may lose all of your invested capital. Please ensure that you understand the risks involved.