Forex Trades By Retail Investors are Growing in Popularity

The retail industry has endured some considerable changes over the last ten years. Recent industry trends include stores adopting multichannel strategies, personalized and social media shopping, and retailers joining pop up partnerships to build brand awareness and generate buzz. The increasing volume of forex trades made by retail investors is another emerging industry trend. It is growing fast in popularity. Despite being much lower than its counterparts in the foreign market, such as multinational corporations and commercial and investment banks, we are still seeing an upward trajectory of retail investors participating in foreign exchange trading.

Commercial and investment banks are still the key players in foreign exchange trading. This is because commercial and investment banks trade with each other in the interbank market, which generates the largest volume of currency traded. But central banks are also important, as their open market operations influence currency rates. A central bank also fixes the price of its native currency on the forex market.

Investment managers can play a significant role in the forex market, too, just like in the stock market. Investment managers will trade currencies for everything from endowments to pension funds. Some investment managers opt for making speculative forex trades rather than executing speculative currency trades. Hedge funds, which also have a strong presence in the forex market, prefer to conduct speculative currency trades as part of their investment strategies.

As for multinational corporations, if, for example, a company is in the business of importing and exporting, then they also conduct forex market transactions. These companies do so to pay for goods and services. They may also decide to trade forex to hedge the risk tied to foreign currency translations.

Even though forex trading was around years before, interest from the big providers in the forex market, such as hedge funds and banks, spiked in the early 1970s. Many players then followed, turning the forex market into one of the largest financial markets in the world. Forex trading differs from binary trading because traders can still profit even if they’re partially right. Similar to stocks, forex trading involves purchasing a currency and then selling it when the value has increased and vice versa. Yet, since currencies trade in pairs, new individuals may find trading forex challenging without first receiving relevant and accurate market analysis. Forex brokers usually want to know the level you’re coming in at and sites that help you find a broker will let you select whether you’re a beginner, intermediate or professional. That way, you can select the right fit.

While still a new forex segment, retail forex trading has skyrocketed in popularity. Retail investors are determined to profit from exchange rates between different currencies. This type of investor participates in both short and intermediate-term trading, with strategies that include swing trading and scalping, as well as long-term investing. Of course, trading on the forex market is a different experience when you’re with a central or investment bank or a multinational corporation. This is because the big providers have experienced departments that can steer you in the right direction. Individual investors often do not have that luxury, and so many develop their working knowledge of the landscape online.

Retail investors can base currency trades on different technical factors, including price patterns and technical indicators, which are pattern-based or heuristic signals. Retail investors also consider a combination of fundamentals, such as interest rate parity — an equation that governs the relationship between currency exchange rates and interest rates — and inflation rates.

Trading on the foreign exchange is no longer a financial activity limited to those in an institutional framework. With the growth of the Internet, those trading retail can enter the forex market through online brokers. And since investors have individual needs, there are different brokers to choose from. Brokers include ECN brokers, market movers, or no dealing desk brokers, which provide investors with direct access to the interbank market. Like with many things, trading forex has its challenges, but there are resources out there to steer new investors in the right direction.

The retail sector is always changing. What we know today might change or evolve tomorrow. That said, the market has a bullish stance on retail forex trading. This stance indicates that the forex market is a practical way for investors to capitalize on market opportunities. If not, retail investors can always exit the market if the trade starts to lose momentum, still making a profit.