Foreign exchange, or forex, is the largest financial market in the world. Yet trading is tough with just a few major wins among many more small losses, which means it is not a scenario for getting rich quickly. This requires discipline and planning. Many fail in forex trading as they allow emotions to get in the way of trading decisions and go off-plan with regards to risk management and expected return on investment.
More millennials and Gen-Z start forex trading
It is expected that established fintech brands will target Millennials and Gen-Z who want to get into forex trading. Being so familiar with technological advancements and investment opportunities offered online, they are more willing to invest in Forex and make the most of any forex deposit bonus on offer from reputable agencies. Forex is only one sort of investment that millennials and Gen-Z are likely to take up in 2021, with hedge funds, commodities and private equity likely to see more interest from this demographic.
There are many trading apps available to help with amateurs begin forex trading. These apps are one of the trends expected to increase in 2021, supporting new traders, in particular, to stick with a trading strategy without risking more capital than is necessary. This means providing customers with signals and trading ideas that can guide trading in the forex markets. The best apps offer help to help successful trading. The developers of the best apps may also provide online courses focused on finance and trading.
The pandemic will remain a major factor
The foreign exchange market was heavily impacted by the coronavirus pandemic in 2020 and is likely to be a major factor in 2021, creating continued volatility relating to the control of Covid-19, though rather than suggesting austerity, policymakers are currently discussing growth and inflation to drive down public debt burdens.
The pressure on the US dollar remains strong, and the expectation is that it could fall by another five or 10 per cent, though not to the levels seen in 2008 when the US Dollar Index touched the 71 level since US President Biden is expected to return to a rules-based international order with more balanced global growth.
The Australian dollar ended 2020 strong and is safe thanks to interest rates here and in most developed countries that are expected to be low for several years and though relations with China have been strained, this should not be significant to forex trading.
The UK pound is under pressure due to the UK’s struggle to contain the new variant coronavirus which may put additional pressure on the country’s economy. The economic impact of Brexit is unclear, though the risk of a no-deal Brexit was averted. Overall, the UK is still facing the possibility for a double-dip recession in the winter or 2020/21 due to increased lockdown measures and slower recovery rates challenging the first half of 2021.
Like the UK, Canada is also suffering from a second wave of coronavirus although the situation did stabilise in December, and currently, the outlook for the Canadian dollar looks favourable.
The pandemic provided significant support for the Euro as traders turned focused on problems of the US dollar. The euro is expected to move higher, and the European Central Bank’s powers to halt this is limited, so forex traders expect new highs in EUR/USD at the start of 2021.
Carry Trades a new normal
A carry trade in forex is when a trader looks for a profit from an interest rate differential between the two currencies within a Forex pair. It can be very profitable to hold a position overnight and profit from the difference between rates via swaps paid into your account by your Forex broker. However, finding variations in rates has become a lot harder due to the ongoing pandemic and a global recession with even the traditionally conservative central banks of Australia and New Zealand bottomed out at, or near, zero. However, it is still possible with exotics such as the notoriously volatile South African rand, Mexican peso and Brazilian real with currency pairs featuring USD, EUR and even JPY variations, but the risks are much higher.
Cloud-based e-FX platforms
Cloud-based forex trading platforms will likely become the new normal since they offer reduced costs, flexible design, high reliability and extremely low latency which is ideal in a constantly evolving market, with regards to regulation, specific products as well as actual market conditions.
Cloud-based systems offer enough flexibility that the cloud can be customised to match requirements, including the handling of thousands of datasets including FX data. With forex traders generally working from home, connections with other traders and broker information have been managed in the cloud to distribute details remotely with efficiency.
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