With the events from the last year disrupting global economies, even the trading industry has experienced some complex transformations. The foreign exchange, or as people know it, Forex, is the largest financial market worldwide and manages $2.4 quadrillion daily in activities that involve trading currencies.
The Forex market is based on international trade between nations, and the pandemic triggered high economic uncertainty, isolationism, and disruptions in trade because it forced countries to close their borders. Each state’s response to the pandemic can affect their domestic economies and therefore cause significant effects in the trading world.
What can traders and brokers expect in terms of trends in trading over the following months?
Did the pandemic impact the Forex Market?
While governments worldwide imposed a series of regulations (and lockdowns) to prevent the virus from spreading, online business activities flourished and assumed the role of keeping economies afloat. During uncertain times the prices of gold, oil, and stocks fluctuate, and the pandemic served as the perfect pretext for rates to fluctuate as they haven’t done in a long time. For some industries, this fluctuation posed a series of risks, but for others, like trading, it presented prospective opportunities and rewards. The pandemic caused an intensified interest in Forex trading, as people saw it as an opportunity to grow their income.
Although some financial markets and many industries found themselves on the verge of collapse, the foreign exchange was thriving at the opposite pole. Reputable Forex brokers registered growth in the number of new clients who registered with their services and trading volumes. This can be the result of the fact that investors have started to switch from traditional stock trading to new income generating activities, and more people are engaging in trading, as information is widely accessible. They can gain all the knowledge they need to excel. The barrier people met when they wanted to trade currencies has been lowered lately, and since the pandemic changed the market, there are a new set of things to consider when entering the arena. This article unveils the latest trends that are expected to revolutionize the trading world.
As more people join the Forex trading journey, the market becomes more welcoming and understands the obstacles they might experience when engaging in trading activities. Traders consider trade protection essential because it safeguards their positions and prevents their money from being lost. When the platforms offer trade protection, beginner traders feel more comfortable navigating the Forex market because it minimizes the risks they expose themselves to. Some trading platforms promote zero risk trading for beginner traders and reimburse them when the positions go south for a determined period. This is one of the main reasons why more individuals want to try their hand in trading currencies.
Online Forex trading academies
To help beginners gain the knowledge they need to engage in complex trades and make their entry to the industry easier, trading platforms have created a list of courses that allow them to educate themselves about foreign exchanges and learn how to use particular instruments that can improve their technique and methods. Online trading academies specialise in education and training on Forex, futures, stocks, and other options to help them gain more skills and become better traders. It’s beneficial for beginner traders to join an academy because they can quickly learn all the aptitudes they need to avoid costly mistakes. Alongside Forex trading academies, there are several free resources online trading providers developed to serve beginner traders, which work as gap knowledge fillers. The good news is that traders can self-educate and have access to many paid and free resources.
Social trading platforms
A few years ago, trading was a solitary and kind of secretive industry. But since 2019, the market saw a rise in social trading platforms that make it more appealing to new traders. Social trading platforms allow professionals to share information and tips with one another. This is an example of a barrier the Forex trading market lowered to encourage traders to join the industry, as information is easily available for those who want to find it. Most Forex providers have social platforms that urge professionals to pass on the information and allow other players to copy their strategy to get more people into the industry and grow their audience. The greater the number of traders, the better the industry’s performance. Research also shows that tech-savvy young traders are more likely to trust the strategies they find through social trading than the ones promoted by brokers and trading providers.
Leverages VS regulation
Retail investors are about to get extra protection when it comes to trading because the regulation in the sector changed. Trading is famous for its excessive leverage that can trigger risks for the system and individual traders. However, the European Securities and Markets Authority suggested creating a leverage cap for retail Forex trading that limits the leverage to 30x for major currency pairs and 20x for non-major ones. This is a try to make the industry work for all traders. Regulation plays a crucial role in this because it impacts the way traders act.
A new generation of traders
Individual investments are predicted to grow in the following months because the pandemic triggered the growth of self-employed workers. The trend is also spreading to the trading sector as people no longer rely on investment banks to trade on their behalf. They learn the main principles of Forex trading and operate on the market. Beginner traders also have access to trading apps that allow them to place trades and gain wisdom successfully. These apps support the new generation of traders to create and follow strategies and prevent risking more capital than needed.
It’s challenging to predict the Forex market’s direction as anything can happen in a volatile industry. But the above trends don’t keep us entirely in the dark and provide a glimpse of future developments. Investors should pay attention to them because they’ll definitely influence the potential outcomes in the following months.