Forex trading has become increasingly popular with many enthusiastic traders hoping to cash out on returns after spending considerable time getting to know the strategies and tricks of the trade. Unlike gambling which largely relies on chance and luck, Forex trading is based on skill and strategies that can help you put the odds in your favour.
Forex is a portmanteau word comprising the two terms “foreign” and “exchange.” The premise rests upon the idea that a currency’s value at any given time does not necessarily reflect its true value. Forex trading involves buying and selling of different currencies, based on their exchange rates.
In Australia, Forex is a legal activity that is also a taxable one. It is regulated by the Australian Securities and Investment Commission (ASIC), that oversees and manages financial markets, making sure that brokers adhere to the laws and regulations as outlined in the Corporations Act of 2001. There are various platforms to access Forex trading in Australia that provide links as well as handy information and key methods for effective and responsible trading.
What kinds of taxes is Forex subject to?
In Australia, Forex trading falls under the category of speculative activities. Ventures in this category are subject to what is known as a capital gains tax, or CGT. A capital gains tax is pretty much like it sounds – a tax on the profit or returns from selling an asset, whether it happens to be property, shares or Forex.
The taxes can be quite significant, with investors having to pay capital gains taxes of 50% of their marginal tax rate. However, most Forex traders are categorised as business owners and therefore not liable to pay taxes on Forex gains since it falls under business income, which is taxable according to the current rates.
What are the most popular currency pairs in Australia?
For starters, let’s take a look at what a currency pair is. In Forex, a currency pair is another term that is fairly self-descriptive, since it signifies a couple of specific currencies. Major pairs are ones that are coupled with the United States dollar.
In Australia, the most popular currency pairs are naturally with the Australian dollar, or AUD. At the top of the list is the Australian dollar and United States dollars, or AUD/USD. Other pairs include Australian dollars with Japanese yen and New Zealand dollars – respectively AUD/JPY and AUD/NZD – and the major currency pair of the United States dollars and Japanese yen, or USD/JPY.
Forex currency pairs come in three categories: major, minor and exotic. As mentioned above, major currency pairs are ones that always include United States dollars. The seven minor currency pairs are Euros and the British pound sterling, Euros and Australian dollars, British pounds sterling and Japanese yen, Swiss francs and Japanese yen, New Zealand dollars and Japanese yen, and British pound sterling and Canadian dollars. Exotic currency pairs involve currencies from emerging markets.
Similar to how playing responsibly is essential when it comes to sports betting and gambling, responsibility and accountability are also of key importance when it comes to Forex trading. No matter whether you find yourself trading in Australia or any other nation, good sportsmanship, honesty, straightforwardness and owning one’s actions make for a good foundation when it comes to being an esteemed trader.
It is not uncommon for traders to blame a bad outcome on the market, on the currency or other external factors. Good traders know that each and every trading decision is their own responsibility and no one else’s. Taking a poor outcome in good faith and in good stride makes for a firm and grounded position that will help you to weather the continuous ups and downs of the market.