Money Traders

Welcome to MoneyTraders.com.au, our aim is to educate you on money trading (also known as currency trading and Forex) and helping you get started on your trading journey.

Before we begin, it is highly advisable that you have had experience in share trading before looking at the Forex market. The risks are high and it is unforgiving if you do not understand the basics of trading. If you think you are ready to take the next step and enter the exciting money markets, read on….

The aim of money (currency) trading is to take advantage of the constantly changing values of currency pairs (i.e. the value of the Australian Dollar relative to the US dollar, quoted as AUD/USD) in order to make a profit. One of the great benefits of this market is that it trades round the clock during the business week and money can be made on currencies both when they are moving up and when they are moving down, of course the difficulty lies in accurately forecasting these moves.

Forecasting – Technical v Fundamental Analysis

In order to become a bone fide trader and not just a punter, you will need to become familiar with technical and/or fundamental analysis.

Technical analysis is the use of past pricing information to help predict future movements. For technical analysts price charts and indicators based on mathematical formulas (i.e. moving averages, MACD, RSI, etc) are the primary tools.

Fundamental analysis is the use of economic and political information to determine future prices. Many factors can be looked at, including: interest rates, reserve bank intentions with regards to currency protection (invoked by China and Japan in recent times to protect their respective economies), trade figures, employment rates, etc.

There is no better method, however some assessment of recent price activity is always recommended as it aids in deciding entry and stop loss levels.

Key differences to stock trading

Leverage – Whereas 1:1 leverage is most common in stock trading, Forex offers 100:1 leverage as standard, some brokers offer well above this level. This means that you can control at least $100,000 of currency for every $1000 margin. You can see how the risks and rewards are amplified.

Fees – In stock trading you generally have a fixed, or percentage fee depending on the sums involved in the trade. When trading currency the price of trading is the spread. For example, imagine AUD/USD is trading at 1.0512, the price offered by the broker will usually be quoted as follows 1.0510/1.0514, therefore you will be paying 2 pips more than the current price when you buy a currency and receive 2 pips less than the current price when you sell. This is an example of a 4 pip spread.

Volume – The volume of trading in currencies is astronomical compared to that of individual shares. The market is far more liquid and results in less slippage when buying and selling. Due to the increased volume, good brokers generally provide guaranteed stops in Forex.