Foreign Exchange, shortened as (Forex), is the largest financial market in the world. Statistics show that about $6.6 trillion is traded daily on forex markets. Major players in the industry include hedge funds, multinational corporations, investment managers, and central banks. Retail traders only account for about 5.5% of the world’s forex market.
Retail forex trading has made it possible for individuals to join the bandwagon. Today, individuals can leverage both fundamental and technical analysis to speculate on price changes.
Since the inception of retail forex trading, we’ve seen a steady influx of new investors in the industry. Over the years, we’ve seen a steady growth of forex trading in spite of external factors like Covid 19. If you are a new investor, you may be confused if this is a good fit for you. In this article, we will look at why the forex market will continue to grow in years to come.
What is The Forex Market?
The forex market is where currencies are being traded. You need to exchange currencies to perform international trade. Forex trading is performed over the counter (OTC) meaning all trades happen through computer networks among traders around the globe.
Just before we dive in, let’s look at some interesting statistics about Forex.
- Forex had an increase in daily turnover from $5.1 trillion in 2016 to $6.6 trillion in 2019.
- The value of the forex industry increased from $1.934 quadrillion in 2016 to $2.409 quadrillion in 2019.
- Unlike the stock market, the forex market operates 24 hours a day.
- You can trade up to 170 currencies on the Forex market.
- The forex market is 17 times bigger than the global GDP.
Now that we’ve gone over a few, let’s look at why these stats will keep growing.
6 Unmatched Reasons The Forex Market Will Continue To Grow
- Increasing Electronic Platforms
Technology has made forex trading easier than it used to be. The introduction of electronic trading platforms in the late 90s has opened opportunities for retail traders. Today, more than $280 billion dollars are being traded daily by individuals.
In recent years, there’s been an increasing number of forex trading platforms. With each platform comes regular updates to accommodate today’s technology. It has resulted in increased profitability with the introduction of trading bots.
You can also register for different investment courses to better understand how to predict the market. These courses teach students the rudiments of the market and how to make precise calculations. They help you increase the profits you can make from Forex.
Third parties now provide additional software with various plug-ins and add-ons. Notable trading platforms include the MetaTrader 4, TradingView, MetaTrader 5, etc. With this increasing technology, you are sure to find newer ways to practice trading.
- Daily Trading Opportunities
The forex market is the only financial market that allows you to trade 24 hours a day. It provides flexible time for traders to trade the financial market. People with tight schedules can choose a convenient time in the day to look for opportunities.
However, it is advisable to trade when market sessions overlap to leverage high volumes. It may not be an issue for those who perform technical analyses of the financial markets. With pending orders, you can set an entry when your trading strategy is met.
- High Liquidity and Volatility
Liquidity refers to how quickly you can buy or sell an asset in Forex. Volatility deals with the market’s rate of change.
The forex market has been growing exponentially over the last two decades. About $6.6 trillion is being traded in the forex markets today. High trading volume results in high liquidity of the forex market.
Moreover, the high volume reduces the risk of price manipulation from individuals and multinational companies. With the right strategy, you can relax as a trader knowing you can quickly enter a trade at any moment.
Higher volatility implies greater opportunities for traders to make profits. It can also lead to a loss depending on the position the trader enters. Therefore, it is advisable for traders to know their strategy well and take proper risk management.
- Minimal Trading Costs
Many people today do not have a substantial investment because of the cost involved. One might need several thousands of dollars to invest in other industries like real estate. It has led many to look away from anything investment.
Retail forex trading has changed the story with many trading platforms available today. You can start your forex trading with as low as $100. Some brokers will even allow you to start your trading journey with a lesser amount.
You may want to ask, how are the brokers making their profit? Brokers make their profit from spreads attached to each trade. Some spreads are so small that you would not even notice that you are trading at a cost.
- Leverage and Demo Trading
All forex brokers provide traders with the opportunity to use margin. You can trade large amounts with a relatively small account. It can result in making a huge profit and a huge loss depending on your position.
People that take out time to learn investment properly will know how to make better decisions. Hence, they can use leverage to their own advantage. Beginners can make investing for beginners course to become a pro.
Demo trading will be a good place to start your forex trading journey. You can take real-time analysis and take trades without risking anything. It will help you practice your trading strategy until you build a model you can work with.
- No Commission Required
In stock trading, you will need to pay a stock broker commission before you can take trades. It makes it harder for people with small accounts to trade stocks. Unlike the stock market, forex trading does not require commission before you can enter a position.
Moreover, you don’t have to worry about a fixed lot size in trading forex. You can choose any lot size that your trading account can accommodate. Thorough research of brokers will also help traders to choose the best platform to use.
It is no news that forex trading has come to stay with us. We see the proof from the constant growth in the industry in the past decades. There will always be a need to change one currency to another.
It is necessary to understand how the market works to make a meaningful profit from it. Therefore, everyone intending to start forex trading should enroll in a forex trading course. Just like people research the best crypto to invest in, the same approach is needed in forex.