Coronavirus would be at the root of the sharp increase in forex trading activity. This is revealed by an IronFX research.
According to this broker, forex trading in the pandemic months increased by 300%, with a 50% growth volume per month for 6 months.
But what has happened exactly? The economic crisis and the lockdown period probably led many people to spend a lot of time at home and fear for their economic fortunes. Online trading in the forex markets has probably been seen as an alternative way to pursue earnings.
Specifically, IronFX experienced a monthly growth of 25-50% for a total of over 220,000 new accounts on its platform between March and June. Volumes also grew sharply, increasing by 300% over the same period.
Approximately 60% of these new customers come from East Asian, Eastern European and African countries, i.e. those countries with the greatest economic difficulties.
Investments vary from raw materials to refuge currencies. Oil transactions have stood out, despite the fact that the price of crude oil has fluctuated sharply and even ended up in the negative.
The forex market has always seen a slow growth, equal to 40% in 10 years. This is why the dizzying increase in accounts and volumes in recent months has put small brokers under pressure. Large brokers (such as IronFX) have taken advantage of this, providing greater reliability and responsiveness.
Forex trading, growth will continue
But will this trend continue? Will people still continue to seek refuge in the forex markets to protect their earnings? Andreas Efstathiou, senior analyst at IronFX, explains:
“Market volatility is directly affecting the steep rise we’re seeing. The profit potential it signifies is undoubtedly a major pull factor for traders who wish to leverage on price swings. However, other sociological trends may have contributed, as well”.
The trends in question are mainly smart working and the economic crisis. In fact he adds:
“Working from home has given 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 more about trading and may feel like global events present a unique opportunity to make a profit. Naturally, this means a higher interest in the market and more trading activity. Forex trading has also been done online for many years, making it one of the most natural courses of action for new and dormant traders looking for profitable avenues”.
The fact that the economic crisis will last much longer, and that the whole world is struggling with the second wave of Covid-19, suggests that forex trading activity will continue to remain high.
And so will the volatility.
What is forex trading
The forex market involves the buying and selling of goods, currencies and commodities, which takes place on so-called OTC (over the counter) online platforms. They are decentralized, so there is no one who physically works there.
These brokerage platforms are active 24 hours a day, 5 days a week. Forex markets are strictly regulated by special supervisory authorities. They are highly liquid markets where traders invest and speculate. They are characterized by high trading volumes and volatility that goes from being low to being very high.