Much like many big industries that operate online, the forex market has changed considerably, thanks to technological innovations and widespread online developments. Today, we will examine exactly what changes have occurred and which were landmark events that caused the forex market to evolve.
What is the forex market?
Firstly, we will begin by explaining the forex market, which is quite straightforward. The foreign exchange market is where major currencies are bought and sold. Due to the nature of the currencies involved, the market is open 24 hours a day. While most of the pairs match up with the US dollar, other pairings involve the euro and the British pound.
How big is the forex market?
The forex trading market is a monumental sector. It is hard to imagine just how huge the market is. There are trillions of dollars’ worth of assets traded every single day. When traders enter this market, they are split into two categories. Large institutions such as investment banks, which deal with billion-dollar trades, are called institutional investors. Smaller investors, such as you or me, are known as retail investors and use less capital.
If you are trading for the first time, you must invest and trade in an area you understand. Whether you take time to study the topic or set up tools to help you trade, there isn’t much point in doing this if you don’t understand the market. However, even professional traders lose money, as the markets are volatile and do not follow any particular pattern. There’s no way to guarantee that you’ll make money in the forex market.
What type of trading has changed the most?
Dozens of methods are used to try and make a profit in forex trading. There are short-term strategies such as scalping or day trading. However, there are also more complex ways of trading, such as arbitrage trading, which takes advantage of small price differentials between exchanges. Forex arbitrage software is just one specific area that has changed significantly in the world of forex trading, while scalping, swing trading and day trading have all changed in profound ways too.
Automated trading software
One of the key ways to implement safety in your trading strategy is to set buy and sell limits. This involves setting a lower limit to sell your asset in the event of a sharp market decline, and a sell limit if it hits the price ceiling, so you can enjoy your profits. Before the rise of the internet, automated trading software was used by institutions. However, now that technology has revolutionised automated trading, you can use an array of apps to set these limits, and you can also set them automatically on many big exchanges to make sure your trade goes through.
Trade on the go
Mobile technology makes it possible for investors to trade on their mobile phones while they do their daily business. You can trade outside of your full-time job as you try to turn it into a full-time vocation, whereas 20 years ago, you would have had to be glued to a trading desk as a full-time trader.
However, the technology has become so advanced that any retail trader can trade forex 24/7 by pulling out their smartphone and downloading a mobile app.
Trading the news
As social media has brought people closer together than ever, we can access news much more quickly than before. Trading the news is something that successful forex traders do and have done for many decades. Having access to instant news can work to your advantage if you’re looking to purchase an asset straight away.
This is particularly applicable to stocks and shares but can also apply to forex trading, such as the mini-budget unveiled by the UK government in September 2022. Many forex traders traded the news of the disaster budget and made millions in profit by shorting the pound.
Conversely, you can be inundated with news you are unsure is sourced by a legitimate provider. Taking into account huge news stories is just one of many factors that professionals will weigh up before they enter a trade.
Conclusion
Forex market trading can be a profitable venture for traders. However, it can be turbulent and tumultuous for many, particularly beginner retail traders who need to learn how the market works. You must ensure that you invest money you can afford to lose, and fully understand the risks involved before you enter the market.
We have only looked at a handful of technological advancements that have affected the market over the last couple of decades. The truth is we could name dozens, and there will be many more as technology continues to bring convenience to every part of our daily lives.