To say that the coronavirus has had a big impact on how business is conducted today is an understatement. Steps were taken by the government to curb the spread of the virus resulted in changes to the foreign exchange trade These alterations are bound to have long-term effects on the Forex market, even after the pandemic is over.
How do these changes affect an individual investor’s overall strategy in the market today? Should new players consider starting trading forex in 2021? Here are some of the major changes in the foreign exchange market over the last year.
Many people lost their jobs or saw their businesses fail in 2020 due to the Covid-19 pandemic. This led to a universal search for alternative sources of income.
Forex trading has attracted some of these people, increasing the number of traders in the market. The new users have also led to more transactions made in a period, making the industry more competitive. Ultimately actions of an individual trader have less effect on the market.
Africa has seen the greatest growth in Forex trading with an increase of about 477%. This can be attributed to low transaction costs making trading affordable to those with low capital.
Adoption of Autotrading
Automated trading software enables a trader to set entry and exit positions in the market. The program then makes trades for you in different markets and times, increasing your reach and frequency of transactions.
New traders use the programs to reduce the possibility of mistakes and to help them learn the market. Experienced market players on the other hand use bots to increase their trade volumes and to participate in more markets.
This increased use of trading robots has made the forex market more predictable. Traders can learn the behaviour of certain currencies at specific prices and times. This information can then be used to make trading decisions.
A whopping 90% of manual forex traders do not make money from their trades. Replicating a successful strategy using robots greatly improves your odds of making profits.
The US Dollar usually benefits from periods of global recession because the declining value in other currencies leads to increased investment in the American one. This makes the dollar more stable, even with the pandemic.
Commodity-based money like the Canadian dollar most of the Asian currencies are however not so lucky. Trading goods and services all around the world are at its lowest since the great depression. The currencies are for this reason reducing in demand and value.
The Effect of the Coronavirus on the Forex Market
2020 was a good year for Forex trading brokerage firms. Lockdown laws around the world led to an increased interest in the industry, resulting in a record number of new customers.
Currency volatility has been on the increase since the initial panic at the beginning of 2020. Traders have also become better risk-takers, increasing the performance of the trade as a whole.
Normalization of the Forex market is likely to occur in 2021 and the discovery and spreading of the vaccine are likely to calm the market further.