Forex (short for foreign exchange) is the global market where currencies are bought and sold against one another. Most Australian CFD and forex brokers give you access to this market directly through an online platform, often with leverage, meaning you can control a large position with a relatively small deposit.
How Forex Works — A Practical Example
Say you believe the Australian dollar will rise against the US dollar. You open a long position on AUD/USD at 0.6500, meaning you’re buying A$10,000 worth of Australian dollars quoted in US dollars. If the rate moves up to 0.6600, that’s a 100-pip gain. On a standard lot of A$10,000, each pip is worth roughly A$1, so your profit is approximately A$100 before spread and commission costs.
If the rate moves against you — down to 0.6400 — you’d be looking at a A$100 loss on that position. Because forex is typically traded with leverage, even small moves can produce meaningful gains or losses relative to your margin deposit. You can use a pip calculator to work out exact values before entering a trade.
Why Forex Matters for Australian Traders
Australia’s proximity to Asian markets means the forex market is particularly active during Sydney and Tokyo trading hours. The AUD/USD pair is one of the most traded currency pairs in the world, making it highly liquid and generally offering tighter spreads than exotic pairs. For Australian traders, forex also provides a way to hedge currency exposure — for example, if you hold US shares, a weakening AUD/USD affects the value of your portfolio in Australian dollars.
ASIC (the Australian Securities and Investments Commission) regulates forex brokers operating in Australia. Under ASIC rules, retail traders are subject to leverage caps of up to 30:1 on major currency pairs, which limits how much risk you can take on with a single position. ASIC-licensed brokers must also hold client funds in segregated accounts, giving you a layer of protection if the broker runs into financial trouble.
A broker that handles forex well will offer tight spreads, fast execution, and transparent overnight swap rates. A broker that handles it poorly may widen spreads during news events, charge hidden fees, or apply unfavourable swap rates on positions held overnight. Always check a broker’s spread structure before committing real money.
Forex vs CFDs on Currencies
Forex and currency CFDs are closely related but technically different. In true forex trading, you’re exchanging one currency for another in the interbank market. With a currency CFD, you’re entering a contract with your broker to speculate on the price difference — you never actually own the underlying currency. Most Australian retail traders access the forex market through CFDs rather than the interbank market, because the minimum position sizes are more accessible. For most Australian traders, understanding which product type your broker offers is the more important factor to check, as it affects how your trades are executed and what protections apply. You can learn more in our guide on what a CFD is.
What to Check When Comparing Brokers
- ASIC licence: Confirm the broker holds an Australian Financial Services Licence (AFSL). ASIC-licensed brokers must meet strict capital and client money requirements that protect your funds.
- Spread and commission structure: Some brokers charge a raw spread plus commission (e.g. A$3.50 per side), while others charge a wider all-in spread. Calculate the total cost per trade based on your typical position size.
- Leverage limits: Under ASIC rules, major forex pairs are capped at 30:1 for retail clients. Be cautious of offshore brokers offering 500:1 — they fall outside Australian regulatory protections.
- Execution quality: Look for brokers that offer ECN or STP execution with no dealing desk, which reduces the chance of requotes during volatile market conditions. Pepperstone is a well-known ASIC-licensed broker that offers ECN-style execution on forex pairs.
- Range of pairs: Most traders start with majors like AUD/USD or EUR/USD, but a good forex broker should also offer minors and a selection of exotic pairs if you want more variety.
See our picks for the best forex brokers in Australia — all ASIC-licensed, all live-tested by our team.
Trading CFDs carries significant risk. 70–80% of retail accounts lose money. ASIC regulated. We may earn commission via links.