Foreign Currency Trading Hacks [2024]

Looking to improve your abilities as an international currency trader?

Easy foreign currency hacks to help you trade and enjoy more!

Foreign currency trading has become on of the most popular ways of making money (legally) in the world. Often seen as a complex array of analysis, jargon, knowledge and super brain power, trading foreign currency is much simpler than it used to be. A the tip of your fingers, are many analyst notes, business commentary and foreign exchange guides to help make day trading available for everyone.

Some of the most popular traded pairs include the AUD to USD, AUD to YEN and YEN to USD. The AUD/USD pair presents great profit opportunities due to the inverse relationship with risk. The USD is seen as a risk safe haven, while the AUD is regarded as one that rises with the good times and falls with the bad times. Thus it is with this inverse relationship traders forecast the macro and micro economics of Australia USA trade and global trends.

The AUD/YEN pair similarly reflects the relationship of the AUD/USD. The YEN is also considered a safe haven when compared to the AUD, and therefore an inverse relationship also holds true.

If you are starting to begin your foreign currency trading with the AUD to USD exchange (or a seasoned trader just looking to rehash your knowledge) there are several considerations that you should pay attention to.

We have therefore created a list of the top 7 foreign currency hacks. Enjoy!


Hack 1. Find the best exchange rate

Naturally, as a foreign currency trader you want to obtain the best exchange rate possible. Thus comparing online currency foreign currency exchanges is important (and even land based foreign currency traders if you are serious and can exchange with cash).

To compare exchange rates take heed of the spread. The spread is the difference between the buy and sell rate. For example the difference between the AUD and the USD buy sell. The greater the spread the less favourable is the rate to you. The narrower the spread the better the rate is for you.

The spread is measured in pips. A pip is a unit that is 1/100th of 1%. Pips are the commonly used measurement for currency exchange movements, because the size of currency movements don’t usually exceed a percentage point. Also the movements within a pip, may produce a significant gain or loss. Hence pips are the preferred reference of measurement to enable analysis and implementation of buys and sells.

Understand the measurement of pips and how they reflect with the best possible exchange rates. Movement in exchanges are often lower than a percentage point. Bear in mind, exchange rates need to be taken into consideration with Hack 2.


Hack 2. Commission and other fees

Trading currencies is similar to trading in a use car. To balance against the exchange rate, the commission and other fees need to be offset. Some exchanges tout proudly that they have no commission rates applied. This may sound great on the surface, but what you will soon realize is that the spreads that they offer are very poor. Others may offer a relatively high commission rate, but the spreads are very good.

Therefore compare the exchange rate spread and commission rate together. It is this combination that will drive the effectiveness of your day trading. Granted the low volume of trading the less of an impact the commission rate will have for you. So also take this in mind when deciding on a platform.


Hack 3. Foreign currency exchange platforms

OK. Now that you understand there is the spread and the commission rate. Next is to understand that trading requires the use of a software. The software used for trading AUD to USD (as an example) is often described as a foreign currency trading platform. A platform in this context means an IT application that is on your PC or mobile device. The platform usually has many functions and services available, that extends beyond a simple buy and sell instruction.

Some platforms can therefore offer all the bells and whistles for foreign currency trading. And this may cost you more than a platform that offers the basics of a buy and sell.

If you are new to trading, don’t go with the bells and whistles of trading platforms. Cut back on the extra functionality and stick with the basics of buy and sell, with perhaps a margin lending facility.


Hack 4. Margin trading

On of the best additional functions is the ability to trade with margins. This refers to leveraging your exposure to the ups and downs of the AUD to USD pair. This is great to use when you are on a winning streak, but can be dangerous when in a loss position.

Therefore, when using this function, the platform provider will ask for sufficient funds in the account to cover for potential loss.

Leave margin trading to the experts. Keep to the basic buy and sell, unless you are very confident with your skills. Leveraging can expose your positions unnecessarily and keep you up all night. (Trading currencies is nearly 24/7 – infact it’s 24/6 and you will burn out!)


Hack 5. Real-time exchange rates

In today’s world it’s all about the quick and the dead. Real-time updates is extremely important for day trading the AUD to USD pair. Market updates for example unemployment figures, inflation rates, global trade agreements or disputes can cause significant movement in the pair. Therefore having as close as to real-time data as possible is imperative. This includes: real-time charting for technical and fundamental analysis, global macro news and micro economic Australian and US news.

Many traders will not have one source of information, but would have several. The more sources of news and analytics, the informed a buy or sell purchase can be.

Find a platform that excels with Real-Time trading. Real-time news is also a bonus, but focus on the speed of execution.


Hack 6. Now the laws where you reside.

It’s important to know the laws of where you reside in regards to foreign currency trading. You may be required to provide significant documentation that include ID, trading experience, tax details and business details. Some laws such as in Australia are relatively standard across the financial services sector, and more and more safeguards are moving to digital/online. In most developed countries regulators require foreign currency platforms to have the proper licensing and regular compliance reporting.

Foreign currency trading is a fun and exciting way of investing. But be aware of the laws of the country that you reside in.


Hack 7. Keep within your budget

Trading in foreign currency exposes you to gains and losses. This is not different to investing in the stock market, buying property and trading in any commodity. Foreign currency trading therefore requires discipline to stay within a budget.

First and foremost, create a budget and set the limit for trading. Stay within the set budget and trade wisely.


Conclusion

Trading in foreign currency is a lot of fun. It is one of the most dynamic and exciting ways to invest – much quicker than stocks and property. Having said that, you should take note of the 7 foreign currency hacks that we have listed.


Frequently Asked Questions

I live in Australia, what else do I need to know?

Opening a foreign currency trading account, will require you to complete and application form similar to that of opening a bank account. ID verification will be required, Tax File Number (TFN), and bank account details. Australia has one of the slowest internet connections of developed countries so make sure you get NBN fast speed it you intend to trade frequently and fast. Trading platforms are required to have an AFSL license, and therefore regulated by ASIC. Lastly, if trading becomes your source of income, it should be disclosed as part of the quarterly PAYG return after demonstrating one year’s worth of trading history. The first year tax can be submitted in the annual return. Tax deductions can include the commission fees, platform subscription and other expenses for sourcing information.

I live in the US, what else do I need to know?

Similar to the Australian requirements, you will need to provide ID and tax details to open an account. Some US platforms have a completely online application submission process, the majority are still behind the times and required scanned documents. On the flip side, unlike Australia most US residents have access to fast internet speeds, this places you at an advantage over other foreign currency traders residing in other countries with slower internet speeds.

I don’t live in Australia or US but want to trade AUD to USD. Can I still trade it?

Yes you can. But you will need to take note of laws in your country of residence. In all countries ID will be required, and a minimum level of funding will be needed to start. Not all countries will allow margin trading.