How can one start forex trading in New Zealand?
The forex market is the largest financial market in the world and is highly popular in New Zealand. Forex trading, in simplified form, is trading one currency against another. The trader’s commission lies in the difference between the buying and selling points of the currency. The forex market is also known as the FX market, and it remains operational 24 hours per day, five days a week. The standard players of the foreign exchange market are the central banks of the world, retailers, individual investors, hedge funds, business firms, and investment groups.
Trading in the forex market is highly popular among traders based in New Zealand. The country is known for its flexible laws and stable economic conditions, which makes it one of the best places in the world for forex trading. The Financial Markets Authority (FMA) regulates the forex trading industry in New Zealand. This government-operated institution creates and enforces the rules and regulations regarding the smooth operations of the forex trading market. In this article, we will discuss all the essential points one must know to start trading in New Zealand.
Overview of Forex Trading in New Zealand
The New Zealand forex market remains highly active, being home to over five million forex traders. Due to this, the government has appointed an independent body responsible for regulating the FX market by creating and enforcing rules and regulations. The authority is known as Financial Markets Authority (FMA), and it was established in May 2011 to deal with the increasing population of forex traders in the country.
The economy of New Zealand depends mainly on the exports of agriculture and commodities, which makes it one of the best locations to practice forex trading. Since its inception, the Financial Markets Authority has significantly promoted and developed the FX trading infrastructure by protecting it from harmful elements and ensuring transparency.
Some key advantages and disadvantages of forex trading in New Zealand are mentioned as follows:
- 24 Hour Market: The forex market remains open 24 hours a day and five days a week, providing one more than enough time to pursue it as a full-time occupation.
- Easy Education: Forex trading may be complex, but there is enough free and paid content for newcomers.
- Low Cost: Compared to other types of trading, the cost of forex trading is significantly low, and the system is more transparent than others.
- Low Margin: With a minimal margin, one can control a lot of money in FX trading.
- High Liquidity: High liquidity allows traders to convert their assets into cash anytime they want.
- High Risk: The forex market is highly unpredictable as it is the largest financial market in the world. It means the traders lose a massive amount of money if things go wrong.
- Frauds: The chances of getting scammed in forex trading are very high. Due to the many forex brokers out there, the traders sometimes get confused and scammed by nefarious elements.
Legal Requirements for Trading in New Zealand
The main task of FMA is to develop a safe and efficient financial system in New Zealand. The critical responsibilities performed by the Financial Markets Authority are mentioned ahead.
- To ensure compliance with the law and fair treatment of the customers
- To provide customers with first-hand information about the country’s financial situation to help them make the right decisions
- To enforce the existing rules, investigate, and prosecute the forex brokers for any kind of misconduct
- To provide licenses to brokers and other professionals to carry out forex operations and indulge in other financial products and services
The New Zealand traders brokers looking forward to getting a forex trading license from FMA must follow these guidelines:
- They must have a physical office in New Zealand
- Their office must have a compliance director
- All the legal clearances of the customers, such as KYC, AML, and personal records verification, must be done from New Zealand only.
- The brokers must have their company registered in New Zealand, and it must comply with the law of the land.
Getting a forex license in New Zealand takes up to 40 days, and the average expenses are around $14000. Forex brokers may want to avoid the hassle of documentation and meeting other mandatory requirements. In that case, they can use one of the consultancy firms that will do their entire work of getting a forex license.
How to Choose a Forex Broker in New Zealand
Although most forex brokers in New Zealand are genuine, many scam customers and vanish with their hard-earned money. Therefore, forex traders must know how to choose the forex platforms that will satisfy all their requirements and keep their funds safe and secure. To help the traders, we have compiled a list of key factors they must check before signing up for an NZ forex broker.
As forex trading involves financial risks, one must check the safety regulations of the forex broker before depositing money in their trading accounts. One can quickly check this by checking the broker’s license information. NZ forex brokers must have a license granted by the Financial Markets Authority, the chief regulatory body of New Zealand. Thus, it is strongly recommended that forex investors trade in FX with licensed forex brokers, as it will negate the chances of any scams.
One must check the users’ reviews given by the previous customers of the platform as it will give them insights into the operational behavior of the broker. It will also help them understand a forex broker’s user interface and commitment.
The transactional fees charged by a forex broker significantly affect the profit and loss of a forex investor. Investors are advised to beware of fraudsters who claim to charge minimal fees and may scam them in the long run. The FX traders must check whether the broker offers spread-based trading or works on a commission-only model. Trading with the spread model benefits newcomers; however, high-end forex traders must go with the commission-based trading model.
One of the most important factors while selecting the best forex brokers is their customer support service. The customers will feel more comfortable with the forex brokers that provide quality customer service. Some typical customer support methods available at the forex trading platforms are live chat, phone support, email support, and social media. The NZ forex brokers that are attentive to their customers must be given priority.
To simplify the process, we have created a list of reputable forex brokers in New Zealand:
- BlackBull Markets: Best For Social Copy Trading Broker in New Zealand
- CMC Markets: Best Overall Broker in New Zealand
- IG Markets: Best For Professional Trading
- Plus500: Best Broker For Beginners
- HotForex: Best For MetaTrader Platform
Opening a Forex Trading Account in New Zealand
Opening a forex trading account in New Zealand is relatively simple. Here is a step-by-step guide that may help you create an FX trading account without hassle.
Step 1: The first thing to do is to select the best NZ forex broker as per your requirements
Step 2: Now, go to the online platform of the chosen broker and click on the signup/register icon available on the page.
Step 3: At this stage, traders will be asked to enter their personal information, such as their name, date of birth, nationality, address, contact number, email, and other basic information.
Step 4: After entering all the required information, forex traders will be asked to submit some documents necessary for KYC and AML procedures. The standard documents that may be requested from them are ID, Passport, Address proof, banking details, etc. Once it is done, click on the submit icon and wait for the verification to be finished.
Once the forex broker has verified your account, they will receive a notification about the same. Afterward, they can go to the banking section of the platform to deposit funds and start trading immediately. Traders in New Zealand have access to numerous financial instruments such as commodities, currency pairs, CFDs, binary options, and stocks. Most forex brokers in New Zealand allow users to make payments in their native currency, i.e., NZD.
The Kiwis’ most commonly used modes of payment are Visa Card, MasterCard, and Maestro Card. Traders who are not comfortable with using their cards online can also use the Bank Transfer method to deposit funds into their trading accounts. All the forex brokers based in New Zealand also provide the users the option of depositing funds by using the e-wallets such as Skrill, Neteller, and PayPal. A payment method unique to New Zealanders is POLi which enables traders to send money directly from the online portals of their respective banks.
Tips for Successful Trading in New Zealand
Forex trading is great for diversifying your monetary portfolio but has risks. Before starting forex trading, traders must know their strengths and weaknesses to create a trading plan. Without a trading strategy or a plan, you will be entering blindly, increasing the chances of failure significantly. To help you succeed in FX trading, here are some tips you can follow to increase your chances of success significantly.
- The first thing you must do is to educate yourself about the basics of the forex industry. You must have complete information about significant events that may affect the currencies, regulatory news from countries, or any other major financial shock.
- The next tip from our end is that traders must maintain discipline and patience if they want success in FX trading. As it is a game of speculation, one must always abstain from overthinking and not be hasty in decision-making. Discipline will help traders have a clear mind to execute a trading strategy.
- NZ traders are advised to set their goals and develop a trading style best suited for them. Everyone has a different mindset; therefore, the trading style of a trader will also differ from others.
- The selection of a trustworthy forex broker and the availability of an advanced trading platform will immensely help traders make quick decisions.
- Traders are advised to follow their trading plan consistently. Even if they suffer minor setbacks, they must stay energized and rigorously follow the rules. The strategy must be flexible enough to upgrade with the dynamic condition of the market.
- The traders must regularly check their expectancy, boosting their confidence and making them aware of their shortcomings.
- Traders must also keep a balance with the risk: reward ratio as it will help them understand their long-term benefits.
Some of the common mistakes NZ forex traders made are mentioned below:
- Traders nowadays do not create a trading plan and jump blindly into the FX market.
- They do not research enough, which leads to poor decision-making.
- Investors do not take global news seriously, which causes massive changes in market conditions.
- Even after committing mistakes, FX traders do not analyze the mistakes, which leads to repetitive losses.
- Traders miss out on long-term, more enormous profits in the hope of getting quick profits.
To avoid such forex trading mishappenings, NZ traders are advised to create a risk management plan to help them when the trades go south. First, one must learn how to read the forex market, which also gives a good understanding of leverage. Build a well-researched trading plan with a fixed risk: reward ratio, and stop loss limits. Traders must monitor their emotions and keep a sharp eye on global happenings. In order to perfect their trading skills, they must start with a demo account and gradually switch to a real one.
Forex trading in New Zealand is a lucrative practice that can help one earn a massive fortune. Owing to the country’s economic stability and active participation in export and import, one can say that the future of forex trading in New Zealand is coming to the correct terms. To trade in forex, investors can sign up with a trusted and licensed forex broker that offers competitive spreads, good customer service, a smooth platform, and multiple payment options.
Traders should sign up only with those NX forex brokers licensed by the Financial Markets Authority (FMA). This article also mentioned the proper steps to choose the best forex brokers and some tips to help you in your trading journey. We have also provided a list of top forex brokers in New Zealand for traders looking for a safe and secure platform to trade with. However, forex trading is not without its risks; thus, it is advisable that before starting trading, investors must thoroughly research the same so that they don’t face any financial mishaps.