Foreign exchange trading increased by around 300% from the start of the COVID-19 pandemic. Making up this growth were large numbers of first-time traders as well as those from developing nations. Countries in Southeast Asia and Africa contributed some 60% of all new accounts created during the last nine months. Another big area of growth has been among mobile phone users and those in the 18-30 age bracket. These are previously somewhat untapped markets and signify interest from a demographic that was previously not so interested.
Such growth is rare for this industry and prior to the pandemic, growth had previously peaked at just 40%. So what is driving this trend? Why are millions of people turning to forex all of a sudden? Let’s take a look at some of the reasons…
Why are people looking to forex trading?
There are many reasons why more people are interested in trading or speculating on foreign exchange rates. Firstly, with most of the world on full or partial lockdown and many more working from home, people have been able to diversify their interests. Many have turned to forex trading, especially via mobile. This can be a confusing process due to the wealth of
information available so there are comparison sites that provide details of forex bonuses to ensure new traders get the most suitable account. They list the bonuses based on deposits, no deposits, and welcome bonuses so that it is easy to understand. There are even tips on how to find forex bonuses on how and how you can judge them. Then, based on the forecasts and past performances of the currencies they’re interested in, they start speculating and investing.
Another reason why so many are looking towards forex trading at these times is due to market volatility. Big swings in the value of currencies mean there are plenty of opportunities for big profits if investors make shrewd and well thought out trades.
What is causing the volatility?
There are several factors that are influencing the volatility of the foreign exchange market. When the pandemic was declared in March, the world was plunged into uncertainty. National lockdowns started, travel stopped, businesses closed, and people had no idea how long this new reality would last. This caused havoc in the foreign exchange market. Most major currencies dipped as national economies began to contract. Recessions were declared in the UK, US, Japan, France, Italy, and Canada, to name just a few. The USD and GBP fell to the lowest points since the global financial crisis in 2008.
Since then, some countries have opened up and economies have started to bounce back. But as we enter a second wave of the pandemic, the future is still uncertain. This provides a high level of ongoing volatility where prices can swing wildly based on events and occurrences. For example, the announcement that the Pfizer COVID-19 vaccine has been 90% effective in trials caused a surge in markets. Additionally, the ongoing saga of the US presidential elections is expected to cause ripples throughout December and January.
How can I leverage it?
The ability to benefit from these fluctuations hinges on your ability to analyze the current behavior of different currencies, but also to understand how certain events can impact them. You can invest in a currency that is currently at a low value, in the hopes that it will increase. This may require you to hold it as a long-term investment and not hoping for a quick return. Additionally, you can make some short term trades, honing in on small market movements that happen on a daily and weekly basis. It really depends on how much time you have to invest in forecasting, analysis, and research.