The entrance of contracts for differences in the Australian market opened the way for other financial markets. Cfd trading is among the fastest developing financial products available for Australian traders. The growth of CFD trading increased rapidly in the year 2007 which saw many Australian traders and foreign investors open various branches in Australia. Today, contracts for differences trading has continued to grow with estimates showing that the number of active traders continues to grow exponentially.
However, the number of traders dropped in the year 2016, which experts attributed to stiff regulations and market volatility which have forced many foreign cfd trading providers to leave the Australian market. It is important to note that volatility can be good or bad for the market. For instance, volatility brings forth opportunities and enables traders to trade regularly. However, in the event of excessive volatility, it discourages them from trading. Today, cfd trading is big business in Australia with estimates showing that thousands of Australian traders are active. The Australian cfd market is estimated to be worth thousands of millions of dollars.
Growth of Cfd Trading In Australia
In the year 2011, the number of Australian traders was said to be approximately 41,000. Today, experts say that there is a likelihood that the numbers have increased more than five times. This tremendous growth has been attributed to the fact that new traders are hitting the market and some traders who have been dormant are slowly making their comeback. Additionally, many investors have hinted that they will be making their debut in cfd trading in the coming months. Currently, experts in the industry say that there are more than 35 cfd trading companies carrying out their operations in Australia. Even then, the pioneers of the industry still hold the lion’s share.
How Cfd Trading In Australia is Done
Cfd trading is not carried out in the Australian stock exchange. Much of it is done in over the counter markets. This means that the regulations stipulated by the Australian stock exchange are not applied. Investors can purchase on a huge margin regardless of their equity. In addition, they do not have to transfer the full sale price in order to purchase or sell. Basically, the transaction profit is included in their balances, while their losses will be subtracted from the same. If you are looking into joining the cfd trading industry in Australia, there are numerous providers and many more are being launched every so often.
While the Australian security exchange launched a cfd recently, many traders have reportedly been adamant to trade on the platform following poor performance. Again, many dormant traders have rapidly increased even though the overall number of traders keeps fluctuating. Some trading experts say that trading is best executed when the markets are volatile, reiterating that traders are likely to make huge profits out of the huge swings. While they may be right, another theory shows that unpredictable swings may not be quite beneficial.
More often than not, traders will predict that the markets will drop and place a selling order only for them to fluctuate towards a different direction. High market volatility may bring forth more opportunities. It also encourages regular trading among traders. However, excess market volatility has a negative effect. According to an annual survey, the size of cfd trade dropped to $41,000 down from $55,000. Even then, the frequency of trading among investors was seen to have increased. Various Australian traders are devising strategies to attract dormant traders back into cfd trading once the market volatility stabilizes.
The continued share price volatility has necessitated the active cfd traders in Australia to stop trading. This has also led to a drop in the average trade size. Even then, there are indications that interest is deviating from share trading to commodity, currency, and index trading. Cfd trading today makes for a big percentage in business with 35% of businesses in Australia said to be currency cfds.