Retail Forex Trading Industry in 2021: Is It Possible to Sustain Growth?
- After gaining record volumes and new traders this year, what are forex brokers expecting in 2021?
In March 2020, due to a massive outbreak of COVID-19, lockdowns restricted travel, and people were bound to stay at home. Financial markets started reacting and that resulted in several trading opportunities across different assets. Due to high volatility in the forex market, existing traders started increasing their exposure to take advantage of new trading opportunities as new traders entered the market. As a result, forex brokers registered record volumes and new clients. Now that 2020 is about to end, the real question arises, is it possible for the retail Forex Trading Forex Trading Forex trading is the buying and selling of foreign currencies with the aim of generating a profit. The value of currencies, especially floating currencies, fluctuate to varying degrees. This constant volatility of exchange rates opens the door for speculators to invest in a certain currency against another. The Forex market is the world’s biggest and most liquid market, with over $5 billion turnover every single day, with the market being open 24 hours a day, 5 days a week.It goes without saying that forex trading is a very attractive market for not only banks and hedge funds, but even for the small individual trader, due to the low barriers for entry. One literally only needs a computer with an internet connection, and some money deposited with a forex broker. As a simple example, if you were very confident that the Euro (EUR) was going to gain strength against the US Dollar (USD) in the mid to long term, then you may decide to buy (or go long on) EUR/USD. If the EUR/USD was trading at 1.1500 at the time of purchase, a €10000 investment would have cost you $11500. As time goes by, if the EUR/USD gets stronger, e.g. its exchange rate moves to 1.2000 over the course of a few months, and you decided to close your trade there and then, you would have netted $12000, i.e. a profit of $500. No One-Size-Fits-All Approach to Forex Trading Whilst forex trading is easy to delve into, it’s notoriously difficult to master, especially for those without a financial background. A lot of time and effort is needed to practice trading on demo and eventually on real accounts. No doubt it takes dedication, discipline and patience, along with developing an edge to beat the market. That edge is gained by studying at least one of two fields, known as technical analysis and fundamental analysis. The former involves looking at currency charts, seeking out certain patterns using tools and software known as price action and indicators to help determine which way a particular forex pair may meander.By extension, the latter involves focusing on the latest news reports and geopolitical situation of the countries involved. Forex trading is the buying and selling of foreign currencies with the aim of generating a profit. The value of currencies, especially floating currencies, fluctuate to varying degrees. This constant volatility of exchange rates opens the door for speculators to invest in a certain currency against another. The Forex market is the world’s biggest and most liquid market, with over $5 billion turnover every single day, with the market being open 24 hours a day, 5 days a week.It goes without saying that forex trading is a very attractive market for not only banks and hedge funds, but even for the small individual trader, due to the low barriers for entry. One literally only needs a computer with an internet connection, and some money deposited with a forex broker. As a simple example, if you were very confident that the Euro (EUR) was going to gain strength against the US Dollar (USD) in the mid to long term, then you may decide to buy (or go long on) EUR/USD. If the EUR/USD was trading at 1.1500 at the time of purchase, a €10000 investment would have cost you $11500. As time goes by, if the EUR/USD gets stronger, e.g. its exchange rate moves to 1.2000 over the course of a few months, and you decided to close your trade there and then, you would have netted $12000, i.e. a profit of $500. No One-Size-Fits-All Approach to Forex Trading Whilst forex trading is easy to delve into, it’s notoriously difficult to master, especially for those without a financial background. A lot of time and effort is needed to practice trading on demo and eventually on real accounts. No doubt it takes dedication, discipline and patience, along with developing an edge to beat the market. That edge is gained by studying at least one of two fields, known as technical analysis and fundamental analysis. The former involves looking at currency charts, seeking out certain patterns using tools and software known as price action and indicators to help determine which way a particular forex pair may meander.By extension, the latter involves focusing on the latest news reports and geopolitical situation of the countries involved. Read this Term industry to maintain the significant growth it achieved during 2020? We asked industry experts for their take on the retail forex trading industry in 2021.
David Moyes, Chief Commercial Officer at Exness told Finance Magnates that he expects the industry to sustain growth in 2021 due to the record number of new clients.
David Moyes, CCO, Exness
“One major consequence of the pandemic has been the move to working from home, both for traders and brokers alike. The COVID-19 outbreak has also resulted in unprecedented volatility. These have been some of the drivers for the huge increase in trading volume seen since March, as traders had more time on their hands due to lockdowns and less travel in general, and were also looking for new interests to develop since they had newfound time to dedicate. So, not only were existing traders increasing their volumes but some firms have seen record levels of new traders enter the industry. This was certainly the case for Exness regarding both volumes and new clients,” Moyes said.
Sustainable Growth
“Initially in March when the pandemic broke out globally, there was a major upsurge in volatility which, along with all the newcomers, was driving volumes to unprecedented levels. Although there was the inevitable slight drop off in the months immediately after, volume levels had steadily increased throughout the year with levels far exceeding those before the pandemic. For many firms, the increases may well be sustainable given the number of new clients. Also, circumstances around the spare time of people and working from home have changed very little since earlier in the year, therefore, the same drivers for increased volumes still apply. We are getting about 80% of the March volatility volume in Exness and currently running near to a 50% increase from this time last year,” the Chief Commercial Officer at Exness added.
New Traders
While the trend has been pretty evident across the industry about the growing interest of first-time traders. Ahmad Khatib, Chief Executive Officer at Amana Capital told Finance Magnates that the number of new traders this year has broken all previous records. Moreover, he added that all regions have performed extremely well for the company this year.
Ahmad Khatib, CEO, Amana Capital
“Reasons for the recent growth are the extremely high volatility in most asset classes which increased volumes from old clients and attracted new clients to trade. Certain market movements during the year were major breaking news and not just business news (oil going negative, stock indices crashing in March, gold movements, and others), so it was catching the attention of the general public and not only people following business or financial news. The number of first-time traders was higher than in previous years.”
Regional Expansion in 2021
Additionally, Khatib outlined the importance of understanding the local market before regional expansion. He mentioned that the firms must break the region into parts to understand local fundamentals. “It is important to understand the local market fundamentals before any regional expansion. Also important to breakdown the region into parts, because it is not always the case that all countries within a region have the same characteristics. For example, in the middle east each country has its own regulatory structure, business requirements and type of clients,” Khatib added.
Risk Factors
As the volumes increased, traders started taking more risks than normal. Alex Katsaros, CEO of TopFX pointed out this issue in his latest discussion with Finance Magnates. “2020 was a good year for the retail forex industry. It is something we expected due to the combination of extended lockdowns and a very eventful year leading to high volatility across the board. Most of our clients needed a way out of their enclosure, while others tried to supplement their income by participating in the Markets. Traders were ready to take on more risk since it was quite apparent that the daily swings would be colossal. The stress of the pandemic was transferred to the Markets, which then turned very volatile creating even more stress for the investors in a vicious cycle. We expect traders to come more seasoned and controlled into 2021,” Katsaros said.
Alex Katsaros, CEO,TopFX
“It was a great year for us to launch our new retail website and further develop our retail business by opening new local offices across the globe. The higher conversion rates allowed us to accelerate our expansion worldwide, which will continue in 2021," he added.
Tough Year for Introducing Brokers
While 2020 was really good for the retail forex industry, introducing brokers struggled this year due to limited communication activities. “The year wasn’t great for all stakeholders of the industry though. Introducing brokers struggled in 2020, unable to reach out to traders to offer their services. Events, seminars and expos were canceled globally decreasing the effectiveness of their business model," he added.
In March 2020, due to a massive outbreak of COVID-19, lockdowns restricted travel, and people were bound to stay at home. Financial markets started reacting and that resulted in several trading opportunities across different assets. Due to high volatility in the forex market, existing traders started increasing their exposure to take advantage of new trading opportunities as new traders entered the market. As a result, forex brokers registered record volumes and new clients. Now that 2020 is about to end, the real question arises, is it possible for the retail Forex Trading Forex Trading Forex trading is the buying and selling of foreign currencies with the aim of generating a profit. The value of currencies, especially floating currencies, fluctuate to varying degrees. This constant volatility of exchange rates opens the door for speculators to invest in a certain currency against another. The Forex market is the world’s biggest and most liquid market, with over $5 billion turnover every single day, with the market being open 24 hours a day, 5 days a week.It goes without saying that forex trading is a very attractive market for not only banks and hedge funds, but even for the small individual trader, due to the low barriers for entry. One literally only needs a computer with an internet connection, and some money deposited with a forex broker. As a simple example, if you were very confident that the Euro (EUR) was going to gain strength against the US Dollar (USD) in the mid to long term, then you may decide to buy (or go long on) EUR/USD. If the EUR/USD was trading at 1.1500 at the time of purchase, a €10000 investment would have cost you $11500. As time goes by, if the EUR/USD gets stronger, e.g. its exchange rate moves to 1.2000 over the course of a few months, and you decided to close your trade there and then, you would have netted $12000, i.e. a profit of $500. No One-Size-Fits-All Approach to Forex Trading Whilst forex trading is easy to delve into, it’s notoriously difficult to master, especially for those without a financial background. A lot of time and effort is needed to practice trading on demo and eventually on real accounts. No doubt it takes dedication, discipline and patience, along with developing an edge to beat the market. That edge is gained by studying at least one of two fields, known as technical analysis and fundamental analysis. The former involves looking at currency charts, seeking out certain patterns using tools and software known as price action and indicators to help determine which way a particular forex pair may meander.By extension, the latter involves focusing on the latest news reports and geopolitical situation of the countries involved. Forex trading is the buying and selling of foreign currencies with the aim of generating a profit. The value of currencies, especially floating currencies, fluctuate to varying degrees. This constant volatility of exchange rates opens the door for speculators to invest in a certain currency against another. The Forex market is the world’s biggest and most liquid market, with over $5 billion turnover every single day, with the market being open 24 hours a day, 5 days a week.It goes without saying that forex trading is a very attractive market for not only banks and hedge funds, but even for the small individual trader, due to the low barriers for entry. One literally only needs a computer with an internet connection, and some money deposited with a forex broker. As a simple example, if you were very confident that the Euro (EUR) was going to gain strength against the US Dollar (USD) in the mid to long term, then you may decide to buy (or go long on) EUR/USD. If the EUR/USD was trading at 1.1500 at the time of purchase, a €10000 investment would have cost you $11500. As time goes by, if the EUR/USD gets stronger, e.g. its exchange rate moves to 1.2000 over the course of a few months, and you decided to close your trade there and then, you would have netted $12000, i.e. a profit of $500. No One-Size-Fits-All Approach to Forex Trading Whilst forex trading is easy to delve into, it’s notoriously difficult to master, especially for those without a financial background. A lot of time and effort is needed to practice trading on demo and eventually on real accounts. No doubt it takes dedication, discipline and patience, along with developing an edge to beat the market. That edge is gained by studying at least one of two fields, known as technical analysis and fundamental analysis. The former involves looking at currency charts, seeking out certain patterns using tools and software known as price action and indicators to help determine which way a particular forex pair may meander.By extension, the latter involves focusing on the latest news reports and geopolitical situation of the countries involved. Read this Term industry to maintain the significant growth it achieved during 2020? We asked industry experts for their take on the retail forex trading industry in 2021.
David Moyes, Chief Commercial Officer at Exness told Finance Magnates that he expects the industry to sustain growth in 2021 due to the record number of new clients.
David Moyes, CCO, Exness
“One major consequence of the pandemic has been the move to working from home, both for traders and brokers alike. The COVID-19 outbreak has also resulted in unprecedented volatility. These have been some of the drivers for the huge increase in trading volume seen since March, as traders had more time on their hands due to lockdowns and less travel in general, and were also looking for new interests to develop since they had newfound time to dedicate. So, not only were existing traders increasing their volumes but some firms have seen record levels of new traders enter the industry. This was certainly the case for Exness regarding both volumes and new clients,” Moyes said.
Sustainable Growth
“Initially in March when the pandemic broke out globally, there was a major upsurge in volatility which, along with all the newcomers, was driving volumes to unprecedented levels. Although there was the inevitable slight drop off in the months immediately after, volume levels had steadily increased throughout the year with levels far exceeding those before the pandemic. For many firms, the increases may well be sustainable given the number of new clients. Also, circumstances around the spare time of people and working from home have changed very little since earlier in the year, therefore, the same drivers for increased volumes still apply. We are getting about 80% of the March volatility volume in Exness and currently running near to a 50% increase from this time last year,” the Chief Commercial Officer at Exness added.
New Traders
While the trend has been pretty evident across the industry about the growing interest of first-time traders. Ahmad Khatib, Chief Executive Officer at Amana Capital told Finance Magnates that the number of new traders this year has broken all previous records. Moreover, he added that all regions have performed extremely well for the company this year.
Ahmad Khatib, CEO, Amana Capital
“Reasons for the recent growth are the extremely high volatility in most asset classes which increased volumes from old clients and attracted new clients to trade. Certain market movements during the year were major breaking news and not just business news (oil going negative, stock indices crashing in March, gold movements, and others), so it was catching the attention of the general public and not only people following business or financial news. The number of first-time traders was higher than in previous years.”
Regional Expansion in 2021
Additionally, Khatib outlined the importance of understanding the local market before regional expansion. He mentioned that the firms must break the region into parts to understand local fundamentals. “It is important to understand the local market fundamentals before any regional expansion. Also important to breakdown the region into parts, because it is not always the case that all countries within a region have the same characteristics. For example, in the middle east each country has its own regulatory structure, business requirements and type of clients,” Khatib added.
Risk Factors
As the volumes increased, traders started taking more risks than normal. Alex Katsaros, CEO of TopFX pointed out this issue in his latest discussion with Finance Magnates. “2020 was a good year for the retail forex industry. It is something we expected due to the combination of extended lockdowns and a very eventful year leading to high volatility across the board. Most of our clients needed a way out of their enclosure, while others tried to supplement their income by participating in the Markets. Traders were ready to take on more risk since it was quite apparent that the daily swings would be colossal. The stress of the pandemic was transferred to the Markets, which then turned very volatile creating even more stress for the investors in a vicious cycle. We expect traders to come more seasoned and controlled into 2021,” Katsaros said.
Alex Katsaros, CEO,TopFX
“It was a great year for us to launch our new retail website and further develop our retail business by opening new local offices across the globe. The higher conversion rates allowed us to accelerate our expansion worldwide, which will continue in 2021," he added.
Tough Year for Introducing Brokers
While 2020 was really good for the retail forex industry, introducing brokers struggled this year due to limited communication activities. “The year wasn’t great for all stakeholders of the industry though. Introducing brokers struggled in 2020, unable to reach out to traders to offer their services. Events, seminars and expos were canceled globally decreasing the effectiveness of their business model," he added.