With 50% month-to-month growth in trading volumes, forex trading seems to be on a roll. Can we predict what will happen when we’re back to normal?
The coronavirus pandemic has thrown the whole world into a tailspin. Six months after Covid-19 came into our lives, the international community is still dealing with substantial uncertainty. Millions of workers around the globe have lost their income, and the future remains undecided for people and businesses of all sizes around the world. Tourism and travel have taken a huge hit already and it doesn’t appear to be easing up for them any time soon. Business travel has been replaced by video conferences and companies like Zoom have raked in the profits from this pandemic.
In this context, the current boom in forex seems even more remarkable. As those familiar with what is forex trading surely know, the past few months saw massive growth across a variety of trading platforms and commodities. For example, trading broker IronFX reported a month-to-month growth of 25-50% in forex accounts. These percentages represent 220,000 new client accounts over the period of March through June. According to their report, trading volumes also rose sharply between March and June, increasing by approximately 300% over those three months.
These massive increases in the activity and account numbers has placed substantial pressure on all forex brokers in the marketplace.
With so many working remotely, and liquidity demands mean that smaller forex brokers may not be a safe choice for the casual, private traders. As worries regarding withdrawal grow, traders naturally move towards large, reliable brokers. For smaller brokers reputation and quick trader support, withdrawal mechanisms and trader reviews are all of a sudden more important than anything.
Making Up For Lost Income
Extensive growth such as this is extremely rare for the forex industry or any industry for that matter. Especially during a global crisis. Over the past decade, average daily forex trading volume increased by no more than 40%. Of course, the staggering change is a direct result of this year’s unusual financial and economic climate, leading to a series of high-impact factors. So what exactly is going on in the forex trading world at the moment?
Working gives casual traders more time to focus on trading. Also, in the shadow of a looming financial crisis, people are actively looking for new income channels. They have time to learn about trading and may feel like global events present a unique opportunity to make a profit.
Is This A Long-Term Trend?
The circumstances leading up to this rise have been unprecedented, and thus it is impossible to say how it plays out in the long term. Since the amount of data and information available is still small, the predictions will be nothing but educated guesses by brokers, financial analysts, and central banks alike. We have not had anything like this before to compare it to. Not even the Great Depression can compare. And we do not see the same boom in the stock markets, indeed we are in brand new territory in 2020.
Further outbreak ‘waves’ are already predicted over the upcoming months, maybe even years to come, we do not know. But we can assume many of the underlying causes for this unprecedented boom in forex trading will remain in effect or re-emerge, as soon as Covid-19 cases increase yet again. At the same time, further lockdowns, higher unemployment, and social distancing mean market volatility will remain high, and remote work will keep traders focused on forex markets as well.