Forex trading simply means trading of different currencies in the foreign exchange market. There is no location for such markets, rather, it is a network of financial institutions, banks, brokers, and retail traders who trade electronically. The forex market is considered globally to be one of the most liquid markets. In fact, it incorporates the biggest securities market in the world. With billions of dollars infused into this market, there are many platforms available that provide a means to trade in forex. MetaTrader 5 of Australia, an updation over MT 4 is a prominent platform for forex trading in a wide range of securities. It acts as an entrance to the trading market providing various additional features such as expert advice, analysis charts, market monitoring, technical analysis et cetera.
Australian Forex Market
Australia has a global rank of 14 in terms of GDP and 55 in terms of population. Despite this fact, it is surprising to know that the Australian dollar is one of the most traded currencies in the world. The Australian Dollar is heavily influenced by the commodities market such as metals and agricultural output. Variations in harvesting, mining, crop output, metal prices, et cetera can have a profound impact on the currency value which in turn gets reflected in the forex market. Surprisingly, the Australian Dollar has been a free-floating currency since the beginning of the 20th century. This is majorly due to the role of the Reserve Bank of Australia (RBA). Higher interest rates and the stringent need to curb inflation are a few reasons affecting the type of currency.
The 3 Australian G’s affecting the forex market
The forex traders broadly evaluate the Australian forex market on the basis of three factors – geography, geology, and government policies. The geography of Australia puts it in a strategic position worldwide. With an entire continent being a country, the geology of the country provides it with abundant natural resources. Oil, precious metals, iron ore, and nuclear substances such as Uranium are in abundance. Government policies such as high interest rates, low government interference in the markets, stable government, et cetera are a few factors that make the Australian Dollar one of the leading choices of currency in the turnkey forex market.
Types of securities traded in the Foreign Exchange Market
It is very important to make a smart strategy before beginning with trading. Thus it is very important to choose the right forex broker who caters to the needs of a trader. Generally, brokers using platforms such as MetaTrader 5 in Australia that is sufficiently reliable as they provide various additional features which are very useful while trading.
Following are the types of securities that are dealt with in the foreign exchange market:
Spot Market
As the name suggests, this market involves the trading of currency pairs, and the payment for the transactions is required to be made instantly. The spot rate or the price at this present moment is the rate at which transactions are executed.
Futures Market
It requires payment at a future date on a price that is decided in the present. This pre-agreed price is known as the future rate. This market is known for providing consistent returns and thus the forex market is majorly dominated by this type of security.
Forward Market
Although similar to the futures market, the previously agreed terms of the contract can be altered at a future date on the basis of the parties concerned. Thus, it provides higher flexibility than the futures market.
Swap Market
Famous for dealing without incorporating the foreign exchange risks, this type of market deals in simultaneous lending and borrowing between two types of currencies. The borrowed money is paid in the form of the other currency.
