The impact of the coronavirus on the world is so huge that it’s believed to be worse than the 2008 financial crisis. During the first few weeks after the disease was upgraded to a pandemic, major stocks all over the globe experienced huge declines. Yet Forex brokers are an entirely different story. And it looks like it is going to be yet another story in a year.
The pandemic has already given a boost to the industry. ATFX, ADSS, eToro, GMO Click, CMC Markets and numerous other FX brokers are reporting a remarkable rise in trading volumes. Saxo Bank informed that brokerages around the world generally experienced a surge in trading volume. But the biggest growth is yet ahead, as people’s perception of the world and money in particular changes.
Although it is impossible to put a precise date on when the epidemic may be over, experts think a vaccine is likely to become available by
mid-2021 – next summer. And we believe the foreign exchange trading sphere will look significantly different by then. It will certainly evolve and prosper.
Why? Which of the current factors and events are shaping post pandemic trading? Let’s take a look.
1. People understand that the concept of a rainy day is not just a concept. This will populate Forex trading even more. The idea of crisis is already making savings and supplemental income more relevant, which leads to engaging more people in trading. And while people are gradually returning to their work and restoring their principal income – they are getting more money to invest in a possible rainy day. So, the real trading boom and growth of trading volumes might still be ahead.
2. Aforementioned vast number of traders will be accustomed to a quality online service. This will improve broker websites and services. During the global quarantine we got used to intuitive interfaces, quick support, and transparency of services. Our requirements won’t decrease just because we go back offline. It means that companies that don’t offer extensive user-friendly services won’t succeed. Those are the brokers with imaginary photo stock consultants on their websites, who take a whole workday to respond to clients. As well as those who have the essential parts of their terms and conditions in tiny print on the last website page.
3. The acquired habit for quality online services will influence the trading tools. AI-trading robots will be helping traders within a year. Trading robots have already eliminated the human factor when making trading decisions. They help traders preserve consistent control over the current market situation. AI-robots, whose prototypes are already available on the market, will be even more helpful. They will be able to analyze the market on the basis of big data, news, opinions and predict the behavior of financial instruments.
4. Since everyone and everything is online – it’s cryptocurrency time. Global digitalization trend will add value to crypto. Moreover, the attempts to regulate bitcoin and cryptocurrency market, i.e.,in China and the US, and indifference to it, i.e., in Russia will add volatility to this sphere and increase crypto trading volumes.
5. The growing number of traders and trading volumes will amplify the competition for clients’ money. This will make brokers enhance technical reliability. As more money is funneled into the industry, more companies will want to get their share of the pie. As a response to the battle for the traders’ attention, brokers will step up technical reliability and minimize trading risks for their clients. Liquidity hubs that control liquidity streams and provide better risk-management and dynamic leverage calculation solutions that don’t let traders gamble into negative balances will become common.
6. Competition among brokers will also force them to improve customer service. Effortless balance transfer is coming. Today some brokers are already providing their clients with an option of transferring their balances to other brokerages. Robinhood has made it the most convenient. Forex brokers will surely catch up. “Try trading with us – you can leave at any time” is a good marketing trick.
7. Competition will push brokers to invent new ways of keeping in touch with the clients. Broker giveaways of their stocks to new customers may become a common welcoming bonus. Сonflict of interest is common and leads to a lack of trust between traders and their brokers. Some stock brokers are now giving random stocks to their clients. Forex brokers may give out the monetary equivalent of their own stock or actual stock through partner stock brokers. While the first option is a variety of a bonus, the second one proves the brokerage’s financial confidence in itself and its clients. It demonstrates the intention to live happily ever after and thus nurture loyalty.
8. Competition among brokers plus increased trading volumes will decrease additional fees. This year was evolutionary for the stock market. Robinhood made zero trading commision a reality. Forex brokers trading commission has already been zero for several years. Now is a good time for them to play around with their additional fees. The more traders are present on the market – the more brokers can afford tiny and even zero fees. The more brokers can afford tiny and zero feers – the more brokers have no choice but to reduce them to avoid losing their clients. A vicious circle. So, soon enough brokerages will reduce swaps and withdrawal fees, get rid of currency conversion commissions, downtime fee and of all those hidden spendings.
9. Lower fees will introduce an entertainment aspect to trading. A trend to play with stocks emerged due to zero commissions mentioned above. People place bets on popular subreddits if a stock they put it on won’t rise in price. They share their expectations of winning or losing. They invest great money into whatever random commentators proclaim. With the spreading of reduced fee trend, the gamification of the investment field will become an ordinary thing. Forex trading will also become more fun and exciting, not just as serious.
10. The entertainment aspect will also manifest in the way social media influencers and hype prevail over facts and common sense. It doesn’t matter whether Tesla factories work or they are idle because of the pandemic. Elon Musk’s Twitter posts are what creates a real hurricane in the market. “Am considering taking Tesla private at $420. Funding secured.” The post made the company’s stocks soar and added 11% in a day. Donald Trump also manages to create buzz with a single post. His tweet “Amazon is doing great damage to tax paying retailers. Towns, cities and states throughout the U.S. are being hurt – many jobs being lost!” cost the company a 1.2% decline and a $5.7 billion capitalization decrease.
11. Entertainment will boost the relevance of national currencies, too. Reopening of borders and continuing globalization will also affect the Forex market. More travel and socialization, as well as the explosive growth of emerging economies – India, Brazil, South Korea will lead to the growth of national currencies and natural curiosity towards them.
Although no one can clearly predict the future, it looks like the Forex industry is going to prosper, when the pandemic is finally over. The significant increase in the number of traders and their trading volumes, as well an intensification of competition among brokers will push the market to great changes.
Forex industry will become more customer-oriented and technically developed. It will get to be fun and incredibly volatile, unlocking huge potential for the benefit of both brokers and traders.
Posted by Kate Nutriakova, Marketing Specialist at Takeprofit Tech