Forex trading

The advantage of forex CFD trading is that you can take an opposing view with ease. If you thought the same economic release would prove positive for the US dollar, you could just as easily sell or go short EURUSD - simultaneously selling the Euro and buying the US dollar. The major players in the market agree with you and push down the price of EURUSD, and you could make a profit from a fall in the value of EURUSD.

Remember, CFD trading is risky. Just as the markets could agree with your point of view, the price of an instrument may move in a direction which results in a losing trade. In the example above, we noted a depreciation in EURUSD, but it could just as easily appreciate as a result of other factors in the market. Managing risk appropriately is an important aspect of trading volatile instruments like FX.

Typically, you’d need 100,000 units of any base currency to open a standard trade in the underlying foreign exchange market. But with the benefits of leverage, you can trade this same amount with as little as 200 units of base currency. Forex CFD trading allows you to increase your exposure to highly liquid financial markets without excessive capital requirements. At platforms, you can open trades with notional values as low as 1000 units (0.01 lots) of base currency.

If you’re holding a currency pair overnight, you’ll also pay or benefit from differential interest rates between countries, also known as Swap Rates. If relative interest rates are significantly higher in the US relative to Australia and you’re holding US dollars, then you’d typically receive a Swap benefit for holding this position. Conversely, if you’re holding Australian dollars against US dollars, then you’d receive a Swap charge to service this position, since in theory you’d have earned a higher interest rate had you been holding US dollars instead of Australian dollars.