AUD/NZD Trading Tutorial

New Zealand and Australia are both Commonwealth countries which may account for the alarming similarities in their flags. New Zealand has requested that Australia change its design as New Zealand’s design was the first country to have that design. Both have a similar blue background to fit in with the Union Jack’s colors. The Union Jack is featured in the top left-hand corner of each flag. The Union Jack signifies their close relationship with the United Kingdom.

Both flags feature the Southern Cross constellation. New Zealand’s stars are red with a white outline, and Australia’s stars are white. Australia’s flag features a further two stars. The big one, under the Union Jack, represents Australia’s territories. Most people know that the Southern Cross has a fifth star. The New Zealand flag does not feature this fifth star, but the Aussie flag does.

The background of the AUDNZD pair

The island of Tasmania is part of Australia. Any discussion of the Australian dollar will apply to Tasmania as well.

New Zealand consists of two islands, the North Island and the South Island. There are also over seven hundred small islands that owe allegiance to New Zealand. 

New Zealand and Australia are close allies in a political and commercial sense. They are sporting rivals so when sport comes into the picture, they are fierce competitors. The sports that they play have strong ties to the United Kingdom. Rugby is the popular sport of both countries. You will find that when they play a match against each other there is fierce competition and they become sports rivals. But when one team, for example, New Zealand, is playing another team, Australia will probably support New Zealand. 

The two countries are separated by the Tasman Sea. Together they are known as Australasia and form part of the Pacific Ocean’s islands known as Oceania.

AUDNZD Forex pair

The AUDNZD pair is often referred to as the Aussie/Kiwi pair. The Aussie part is because that is the slang term for Australians. The Kiwi is the national flightless bird of New Zealand. 

Because this Forex pair does not feature the USD, it belongs to the minor Forex pairs group. The minor Forex pairs groups are also known as a cross pair. The first currency in a currency pair is called the base currency. The second one is called the quote currency. So Australia is the base currency looking to invest in the New Zealand dollar.

Both the Australian and New Zealand currencies are designated as risk-on currencies. This means that their currency does not do well when the country is under stress. Their currencies are affected by inflation and their general economies. However, the currencies are not affected by world events or by stock exchange ups and downs. This is actually good news for your forex pair. Your trading becomes more meaningful when you are aware of their restrictions. 

Because of their close physical connection and their close ties with the United Kingdom, similar news and climatic events occur in both countries. Both countries have had a semi-successful war on the pandemic. This has helped steady their economies during this worldwide stressful time. The pair does not always march to the same tune. Trading will not be profitable if one of the currency pairs behaves exactly the same as the other one behaves. There needs to be a bit of a difference in the way the currencies react to different aspects. In other words, the AUD and the NZD cannot both go up (or down). If this happens, the trader will have a nil trading balance. If the one goes up and the other is stationary (or goes down), the trader will have a profit or loss. 

History of the currency pair

Australia and New Zealand belong to the Commonwealth. Initially, their currency was pounds, shillings, and pence. But in the mid ‘60’s both converted to the decimal money system consisting of dollars and cents. Outside of the countries, we refer to their currency as A$ or NZ$ but in the home country, it is just called a dollar ($).

The reserve bank of each country is responsible for maintaining financial stability. Australia has the Reserve Bank of Australia and New Zealand has the Reserve Bank of New Zealand. 

Exports

Both countries depend on their exports to stay financially viable. Australia exports metals and energy products. New Zealand depends mainly on farm products like milk, wool, and meat. Australia and New Zealand do a lot of trading with each other. The two countries are trade allies – what the one produces is needed by the other. Because of this common trade practice, their currencies are often dependent. If the currency of one of them falls in value, the other will probably fall as well.

Australia produces and exports gold. This means that the value of its currency is, to some extent, affected by the price of gold. When the price of gold rises there will be a corresponding effect on AUDNZD. Because the Australian dollar is the base currency, its value will increase. As the gold price increases, the spread between the two currencies widens. If the gold price slumps, the value of the two currencies will once again be closely aligned. 

Trading 

Global economies do not impact the value of these currencies as much as local trends. There is not much happening locally in these countries. This makes the choice of the AUDNZD pair a good suggestion for a Forex trade. The pair is usually stable, but it is not so stable that trading could become boring. There is enough movement to add some excitement to the trade. 

Because their day starts while most of the world sleeps, those traders from other regions, who are early risers, can take advantage of the early trading hours. The early trading session is quiet, and because the countries are just waking up, there is not much news that can disturb trading. The excitement of Forex trading develops when Europe, the UK, and the USA are awake. Sydney dictates the trading times for this Forex pair. The Tokyo trading times are also popular times to trade the AUDNZD. The most exciting trading time for this sector is the hour when the Tokyo market and the London market times coincide. 

Trading has four main sessions. Sydney session is where Australians and New Zealanders do their trading. Other sessions are the Tokyo, London, and New York sessions. There is overlap with two or more of these sessions. Trading is brisk during these overlap times.

During the Tokyo session, Australia and New Zealand will be active, and trading in the AUDNZD will be brisker than at any other period. This session will also see brisk trade between Australia, Japan, and New Zealand. The most common trading pairs will be between these countries and the United States of America. During this trading period, most of the citizens of the United States will be asleep. This means that the USD will be reasonably stable for financial transactions.

These two countries wake up before the rest of the world. The overnight financial news has a chance of changing before the rest of the world wakes up. 

There is a strong connection between the AUD/NZD, AUD/USD, and NZD/USD because of innate similarities between Australia and New Zealand. 

How to trade this currency pair

You have decided that Forex pairs are the way you want to go in the investment game, and you have chosen to trade AUDNZD. This currency pair will be a pair to start your Forex trading experience. 

You may be wondering what your next step will be. Sit tight, let me take you by the hand, and help you through the steps involved.

Get a broker

This is your first step to financial trading. The broker is the intermediary between your wallet and your investment. The time you take to decide on a broker is time well spent. The internet is alive with brokers. Unfortunately, many are scam artists just waiting to take money from beginner traders. Some of the alerts for these scam brokers will be:

A banner proclaiming that you have limited time to take advantage of their “system”. There is usually a countdown clock. This clock amazingly resets itself each time you refresh the site. So the countdown clock is not real. If you came back in four days, you would get the same clock, with the same starting time. 

Pictures featuring paid-for actors. These can be found in many guises. They may be labeled “staff” or “investors”. You will notice that most legitimate sites do not feature such pictures. It is quite easy to pick out if these people are genuine staff or investors. Let your mouse rest on the pic. If you see an address like Shutterstock or other internet picture sources, then the entire website is a scam. They have paid the picture site to use the photos. 

Videos featuring paid actors posing as satisfied customers. Again a mouse-over will probably give you information. If not, Google the video or the name of the featured person. There are actors on Fiverr who will play any part you give them for a set fee. There were two scam websites that featured their “CEO” with the same photograph but different names. And if you Googled the names up came photos of Shutterstock as well as details of the actual person – totally different to the featured CEO. Sometimes these people do not even know that their name has been used. 

Be a wary Googler.

There are many ways to find a broker. 

Google one. You will get the names and websites of many brokers in your vicinity and in the rest of the world. So how do you narrow your choice? I will discuss this further.

Your bank may offer the Forex trading floor. Check them online to see if they deal in Forex. You could also email or phone the bank and ask if they are Forex brokers. This could be a safe option for you. 

See if there are Forex Facebook groups that you can join and ask for recommendations. Brokers may also advertise on these groups. If you do a Google search for a broker, Facebook picks it up and the next time you go onto Facebook, you will find ads for brokers. Who says big brother is not watching you?

Your friends and colleagues may be playing around with Forex. Find out who their broker is and if they are happy with them.

Once you have the names of several brokers how do you make your decision?

Check for accreditations on their websites. Are they regulated? Which professional body do they belong to? This is very important. Some countries allow brokers to operate without accreditation. You need to wonder if your investment is safe if the broker is not accountable to anyone. So an accreditation check is important for the safety of your money.

Some brokers are not registered to operate in some countries because of accreditation problems. The USA is very particular on this point. They have to acknowledge this fact (probably in small print) on their websites. So don’t skip over the small print on the sites.

Check out their websites. Is the website user-friendly? You will be spending a lot of your time here. You need to be able to work quickly and efficiently on their website. When was the website last updated? Do they feature up-to-the-minute news links (this is important as a calamity in one of the countries could spell disaster for your investment)? Do they have up-to-date information? Can you see the market values changing in real-time?

What help facilities are available? Is it easy to query things with them? Does your query take too long, or are you helped quickly in real-time?

Do they allow a demo account? For the beginner trader, this is one of the most important facilities. 

How do they sit on furthering your education? Do they have FAQ’s? Do they have documents to extend your knowledge? Do they have “How to…” videos.

Check them out on the Traders Union website. This website claims to only feature accredited brokers. 

Open an account.

Once you have found a broker you can work with, you need to open an account. 

You will need to give some personal information like name, maybe address, definitely an email address, and a cell phone number. In the past, brokers would communicate with you via snail mail so a physical address was necessary. Most brokers now prefer to deal via email or SMS, WhatsApp, or similar texting apps. Hence they request for your email and cell phone details.

Deposit money into your account. What is the minimum amount that is needed? Always start with the minimum amount. As you gain confidence, you can increase your investment amount.

Ask how they deal with problems in your account. If your losses are mounting and you have let the investment lie, will they alert you before closing your account? If your account gets closed, it may be problematic to open it again.

Start trading AUDNZD in a demo account. Try out different strategies in the demo account. A demo account is a learning tool. You can see how you would do in the real world before taking the plunge. A demo account will help you learn how the history in a chart can affect your real-time investment.

Terminology you need to know

Your money is at stake if you do not understand the terminology. The following terms are enough to start your trading journey but you will need to educate yourself further as there are more complex terms that become important as you get more experienced. 

Quote: A quote has two figures in it – a selling price and a buying price. In the currency pair AUDNZD, you use Australian dollars to buy New Zealand dollars. The first figure indicates the base currency, and the second figure indicates the quote currency.

Ask Price:  This is sometimes called the offer price. It is the second figure in the quote. It stands for how much you have to spend on the transaction.

Bid Price:  this is the first figure in the quote and represents the price to sell. The bid price is always lower than the ask price.

Spread: This is the difference between the bid and ask price measured in pips. 

Pip:  Prices (except for Japan) are quoted to four decimal places. The difference between the two prices is measured in pips. So if the difference between the two prices was 0.0002 that interprets as two pips. 

Lot:  This is how many units you need to trade. 100,000 is the size of a standard lot, and 1,000 units are the size of a micro lot. 

Leverage: The broker can lend you money so that your trading can be more dynamic. But bigger gains could also turn into bigger losses that you may not have the funds to cover. The broker will not cover your loss. The broker will demand that the cash be deposited into your account. Leverage is lovely until you lose. 

Stop-Loss order:  sets a limit to your trading in case you are losing. It prevents you from losing more than you can afford. You will normally set a stop-loss amount when you leave your account sitting for any length of time. It is a good practice to set a stop-loss for overnight trading so that you don’t lose sleep by getting edgy about the market. 

It is essential to keep a journal when you start trading, even if you are only trading with a demo account. Write down what you did, when you did it, what strategies you tried, how much money you invested, and what was the outcome of the investment, etc. This is all part of your learning. Frequently come back to read the journal to prevent you from making the same mistake again. And there will be mistakes. No investor gets by without making mistakes now and then. 

Brokers to check out

The following is a selection of brokers who may suit you for your Forex pair’s investments. Check them out to see if they give you what you need.

Roboforex

Roboforex is a reliable, regulated broker from Cyprus. Their client base stretches worldwide. They have received more than ten awards, and they are sponsors for sports personalities. It has a good rating with the organization Traders Union. 

Beginner traders will find the platform user-friendly. Roboforex also helps beginners with courses, videos, online help, and the webinars that they offer. They offer demo accounts for the beginner to get acclimatized. 

It offers a choice of three different platforms:

MetaTrader 4 – A user-friendly platform. It is available on computers, mobile, and tablets. 

MetaTrader 5 – this is also user-friendly and is becoming popular amongst traders. 

StocksTrader – Works with all leading world markets using a trading robot. It offers one-click trading.

Customer reviews are good. Some customers felt that they were helped as beginners. As they have now improved they need to move on with the experience they have gained.

Vantagefx

Vantagefx is an Australian Forex broker. They offer global coverage. It is a regulated Forex broker which boasts rapid trading from many global centers. It offers many tools to help traders and has a good customer support system. 

• It requires a minimum of $200 deposit. 
• It has an active news broadcast updating your marketing news. 
• It offers a 50% Welcome bonus which may be time sensitive
• It has been in existence for more than 10 years. 
• Its apps are available for any mobile or tablet and trading can be done on any device. 
• It offers MetaTrader 5 and MetaTrader4 as platforms.
• It offers a demo account experience. 

Markets.com

Markets.com’s trading platform offers you reliable, regulated brokerage. The platform is user-friendly for beginner traders. It is a global company based in the UK. It is to be complimented on the online education opportunities which will help the beginner trader to get started. 

When you register, you have a choice of four regulators:

• CySEC (EU)
• FSC (GLOBAL)
• FCA (UK)
• ASIC (AU)

• It offers a choice of up-to-date financial news channels. Real-time graphs are available to assist in your Forex decision-making. 
• It offers to trade on any electronic device. 

It caters to traders, especially beginners, in the following ways:

• You can have a live stream that is tailor-made to your specifications with an app called XRay
• It offers an e-book on trading.
• It has a news channel for up to date financial news
• It has an FAQ section that will answer most of your financial trading issues. 

Trading Strategies

When you are trading Forex pairs, you need to develop a strategy. A strategy is a way you will go about your trading so that it becomes successful.

• Many popular strategies are used successfully by traders. You need to find one that works for you. 

Whichever strategy you choose, you need to do a few things before you start trading with real money:

• Using existing charts, back test to see if your strategy works. 
• Have a risk management scenario in place
• Be a disciplined trader; do not get emotional over wins and losses
• Use a demo account to practice your strategy

Use Scalping for quick deals

This type of trading is fast action trading. You have to be able to make quick decisions with Forex pairs that change rapidly. Sometimes transactions between buying and selling the Forex pair can happen in a matter of minutes. You are trading in the momentum of the market.

Typically scalpers open a trade and close it quickly. The best time slot is probably five minutes. Open a trade, and five minutes later, close the trade. You can collect up to five pips on the deal. Some scalpers have a one-minute trading window, while others go for as much as a fifteen-minute window.

If you are using scalping as your strategy, you need to be able to stay with the trade. You must watch the movement, getting ready to pounce into action the minute the trade seems to be moving into a loss. Money can be made scalping if you are diligent. The fast reaction time required may be stressful. If you are easily stressed, this is not a strategy for you. Scalping works best with volatile pairs. As AUDNZD does not quite fit into that description, it may not be the best move for you.

Scalpers usually have many trades operational at a time. The aim behind scalping is to make many small profits in a day. Scalping is ideal for the person who thinks quickly or gets bored easily.

Pros:  

Rapid trading can earn many pips in a day.

Cons:  

Scalping needs a calm approach. If you get stressed easily it is not the strategy for you.

Trend Trading Follows the market

In trend trading, the trader follows market trends. Trends show the direction that the market is going. Trend trading depends on the momentum of the trading. Trend traders are looking for the big wins which do not always present themselves every day. The idea is to let the market run with your investment. They must also be prepared to take losses as trends do not always do the expected.

Sometimes the market is pretty stable. At other times there might be a severe downtrend, and if you are lucky, there will be an uptrend. There are many tools that you can use to help you read the trends.

If there is an upward trend in your Forex pair then you will be thinking of buying. If the trend is down, you will want to sell. If the trend is in an upward direction, you can buy high in the hopes that it will continue to rise. This will allow you to sell even higher. AUDNZD tends to trend strongly.

Trend trading occurs when you engage in long-term trading. If you want a shorter-term strategy that usually runs for a couple of days to weeks, swing trading may work better for you. 

Pros: 

Following a strong trend will lead to financial success

Cons: 

You will probably lose more than you win.

Swing trading suits the laid back trader

Swing traders hold onto the trade they have made longer than a usual time frame. Sometimes a swing trade could be as short as two days or as long as two weeks. They will usually depend on technology. They will use tools like candlestick charts, moving averages, etc. An accurate swing trading decision depends on probability.

One technique that swing traders use is to trade with a trend. Swing traders depend on indicators like a moving average to assess how a trade went in the past and to help predict if the market will swing positively.

If you make swing trading a career, you must understand that it is not a get rich quick scheme

Pros:  

It is not as time-consuming as other methods.

Cons:  

It is not as exciting as other methods. 

Position Trading – the extended trading technique

A position trader hangs on to their Forex pair for a long time. They hope to make a big win. Other traders are happy with smaller wins during several time periods. A position trader wants one big win during that time period.

Position traders will buy at a low price and sell at a high price before a dip in the market occurs. It’s all about waiting, watching, and acting when you think the market will dip. You will then assess when the trade starts to rise. As it rises, you will invest in it again. There is no specific time frame. Your position trade could last days or weeks, or months.

Pros:  

It is not time-consuming

Cons:  

Your money is tied up for long periods.

Day Trading closes each night

As the name suggests, this type of trading starts when the markets open. The trader closes the trade at the end of the day regardless of how the Forex pair is doing.

You need to make sure that you can be vigilant for the day. If you cannot be vigilant you will lose out. During the day, limit your trade to one or two sets of Forex pairs. Keep an eye on candlestick charts and listen to the financial news.

Pros:  

There is no overnight risk

Cons:  

You need to do a lot of research.

News trading for the dedicated trader

Traders who decide to do news trading, need to listen or read the news continuously. This is not a trading technique if you have a nine-to-five job. As soon as you hear news on the AUDNZD pair, you need to act immediately. Quick thinking and an indomitable spirit will assist you in new trading.

Expectations of how you perceive that the market will develop, and how the market reacts to news are actually more important than the news itself.

This strategy is suited to volatile markets. It would not be a good strategy for the Forex pair AUDNZD. The strategy is also best adopted by seasoned traders. New traders may be panicked by this form.

Pros:

As news happens all the time, there will be many opportunities for this strategy.

Cons:  

News continues to happen overnight. You will need to close the trade at the end of the day.

End-of-day trading for part time traders 

At the end of the day, you assess the trade. Will it settle, climb, or close? If you choose this strategy, you will be an active trader for two hours before the market closes. You will need to compare the market with what happened to it yesterday.

You will have to make decisions for a lot less time. This type of trading is ideal for part-time traders. This system requires discipline.

Pros:

You don’t have to be active for long periods. It is less time-consuming.

Cons:  

If you leave the trade open at the end of the day, you may be unpleasantly surprised in the morning. So if the trade is to remain open, you must set a stop-loss order.

Hedging for the long term trader

This system limits the amount of risk that you will take. It is usually a long-term investment. It is protected by another less risky investment.

One system of hedging is to invest in two securities. For example, AUDNZD is a stable Forex pair. If you invest in it, you can invest in a high-risk pair as well. This investment becomes a cushion against losses.

Pros:

A successful hedge will prevent loss.

Cons:  

If you are hedging with two sets of Forex pairs, the high-risk pair could drain your profits from AUDNZD.

Carry trade explores differences in currency pairs

This type of trade is popular when doing long-term Forex trading. With carry trade, you are dealing with differences in currencies. The thought behind carry trade is that you buy low and sell high. If you use leverage, your profits will expand.

Although this is a popular Forex strategy, the AUDNZD pair are usually close in value so carry trade would not usually be used with this pair.

Pros:

You can make a nice profit on stable currencies.

Cons:  

Exchange rates are uncertain and dependent on many things. You could end up losing more than you anticipated.

Momentum trading fir the short term trader

This short-term strategy is not a good strategy for beginner traders. It involves many risks that a beginner is not yet ready to handle. The system was innovated by Richard Driehaus. He took the markets by the short hairs and turned everything upside down. Instead of “buy low and sell high”, his mantra went “buy high and sell higher”.

Momentum trading is frequently carried out by bots. The human just poses as a manager of the transaction. Computers can carry out hundreds of trades per second. A human is not even capable of one trade per second. Momentum trading has gained popularity with the increased use of computers in trading.

In Momentum trading, you decide on your Forex pair. You need to watch the trends and decide how to proceed on the supposition that the investment will increase substantially in a small time frame.

Pros:

Momentum trading could, if managed correctly, earn you a nice packet of money in a short term investment

Cons: 

If the market does not follow your planned trend, your losses could be immense.

Conclusion

By now you are probably eager to see how you would do in the AUDNZD market. Be careful. Trading is not for the faint-hearted or the emotional person. Never trade with money that is needed for living. Don’t trade with all your savings. Do not trade if you are going to sink into depression when you lose. You will lose some of the time, and you will win some of the time. 

Be disciplined with your trading. Choose a strategy and stick with it. You can always change your strategy for the next transaction. Do not sink good money after bad.

If this is your first time trading, use a demo account. A demo account is a learning tool. You can test out strategies without losing your cash. It is normal to spend at least two weeks on a demo account. 

Plan your strategies. Learn to read a candlestick chart. Most of the successful traders look at the history of their trade on a candlestick chart. Continue to educate yourself on terminology, strategies, etc. 

Watch training videos. There are so many available on YouTube. 

And finally, you need to think of your trading as a business, not a pastime. In business, you usually have profits and losses. You do not get hysterical when you have a loss. You shrug your shoulders and carry on. The same goes for trading. 

FAQs