Forex trading

Last updated: 10 September 2026

Foreign exchange trading aims to profit from movements in exchange rates. 

How forex trading works

Foreign exchange trading (also called Margin FX or forex) is an attempt to make a profit by predicting movements in exchange rates. 

Traders generally take a position on two currencies – known as a currency pair. For example, AUD/USD shows the value of the Australian dollar in US dollars. 

You make a profit if the exchange rate moves the way you predicted. You make a loss if it moves against you. 

Retail forex trading often uses leverage. You put up a small amount to take a larger position. This magnifies gains and losses. 

Exchange rates reflect demand and supply for currencies. They move based on interest rates, economic and trade conditions. Even the most experienced traders have difficulty predicting movements in currencies. 

Before you put your money on the line, get independent advice from a licensed financial adviser.

If you want to exchange money for travel or make an international business payment, see Sending money overseas.

Ways to trade forex

• Margin FX is generally regulated by ASIC as a type of Contracts for difference (CFD) and allows investors to speculate on the changes foreign exchange rates without owning the underlying currency. 
• Currency ETFs are where you buy units in an exchange-traded fund (ETF) that tracks a currency.  

Margin FX uses leverage (borrowing to invest). This means that while you get bigger returns if the currency moves in your favour, it leads to larger losses when it doesn’t move in your favour. 

It also means that if the market moves against you, your provider may require you to deposit more money at short notice or automatically close your position.

Risks of forex trading

Small market movements can have a big impact. Many forex trading products use leverage. You only pay a fraction of the value of your trade up-front, but your gains and losses are based on the full amount of the trade. 

• Exchange rates can be very volatile. They tend to move around a lot within very short periods of time. This is a significant investment risk as rates may move against you, causing you to lose money. 
• Currency markets are extremely difficult to predict. Many different factors affect exchange rates. 
• Fees and costs can add up. Forex trading may involve spreads, commissions and financing costs. Frequent trading can reduce profits and increase losses. 
• Limited protection from risk management systems. Stop loss orders can limit your losses, but you may also pay a premium price to guarantee your stop loss order. 
• Forex scams and fraud. Scammers may use fake platforms and promises of easy profits to lure you in. See Financial scams. 
• Forex provider risks. If your provider becomes insolvent, you may not get your money back. 
• Trading delays can severely affect results. You may not be able to make trades when you'd like to, because of a lack of liquidity in the market, execution risk, or computer system problems. 

Do your own checks on forex providers

Different forex products involve different risks. Read the product disclosure statement (PDS) carefully before investing.

Check that the forex provider has an Australian Financial Services (AFS) Licence. ASIC's Professional Registers Search will tell you if they do. 

If you trade through an overseas provider that does not hold an Australian Financial Services (AFS) licence, Australian consumer protections may not apply, including access to AFCA. 

Providers offering add-ons like software, trading robots or seminars may need to hold an appropriate AFS licence or be authorised by an AFS licensee.