As we’re fond of reminding clients; retail forex trading (as a concept), is both a very young activity and business. In many ways it’s a miracle, an accident of birth. It’s as if a Big Bang took place, approximately eighteen years back, as the internet began to become mainstream, to create what’s now become a financial phenomena.
Novice traders may become easily confused and misled that all traders involved in the overall industry of forex are targeting the same movement and the aspect of the industry, but that’s not the situation, as the vast majority of forex is not the traditional retail trading we’re accustomed too. Only approximately eight percent of forex turnover is attributed to our customary retail activity, the rest of the daily estimated $5 trillion turnover, mainly involves tier one banks, conducting position trades for their institutional corporate clients, by primarily using the futures market and this has been the mainstay and foundation of traditional Forex trading for decades.
As we acknowledge just how young our retail trading environment is, it’s natural to question its future and our own position in the industry; where will it be in another eighteen years, how will it develop and further evolve, will retail trading still exist, will we survive? So whilst avoiding any negative possibilities and connotations, let’s project some positive light on where our industry can find itself in another eighteen years, by discussing three examples. But firstly it’s worth mentioning one (perhaps) negative issue for traders, the potential disappearance of a currency, which could be the UK’s pound, if the country’s population regains its lost way and collective mind and decides to call off Brexit and eventually abandons the pound, in favour of the euro.
The year 2035, EUR/CHN, is the most actively trade currency.
However, this negativity of losing one series of securities to trade (albeit a positive outcome for the U.K.), would be outweighed by the potential to trade the fully convertible Chinese renminbi/yuan, not just versus the U.S. dollar (as you can now for a huge spread cost), but also versus: pound, euro, Swiss franc, the antipodean dollars and the Canadian dollar. It is inevitable that “the people’s currency” (yuan) will become a heavily traded currency globally, it may be that EUR/CHN eventually overtakes EUR/USD as the most actively traded currency pair, which may also reflect the demise of the U.S. dollar, from its current position as the global, de facto reserve currency.
Spreads that are so wafer thin you wonder how brokers turn a profit.
And what of spreads? It’s increasingly likely that we’ll witness a time whereby ECN/STP brokers can offer spreads at a fraction of the current quotes and ensure they’re guaranteed and fixed within a certain range, for example; between 0.1 – 0.2 permanent (or lower) spreads, for trading EUR/USD and EUR/CHN. Now let’s add this huge reduction in costs, to the technical developments in the industry that’ll be delivered.
The astonishing development in trading platforms, which has taken place over the past fifteen years or so, is often overlooked. The early adopters in the retail forex industry will not only recall paying five pips spread when placing a EUR/USD trade, but also recall the terror of trading through a personal dial up internet service, over a lagging platform that appeared to take an age to fill every trade. If platform development keeps improving then (allied to much cheaper spreads), our fills will be lightning quick as we will no longer consider 50gb broadband to be acceptable, it’ll be one terabyte of speed, as standard. And the quality of platforms used by institutional level traders in tier one banks, such as the Autobahn and Bloomberg platforms, will become common place in our homes. We may even be able to verbally instruct our PCs, tablets and smartphones to take trades on command.
Your own personal trading Siri.
One final development that is highly likely to occur during the coming years and isn’t in the realms of science fiction fantasy, is automated trading through verbal instructions; our own personal Apple Siri who takes trades as quickly as we visualise them. A self learning A.I. robot, who we can instruct where to place our: orders, take profit limit orders and stops (trailing, dynamic and hard). An A.I. that can also prompt us of upcoming calendar events and perhaps screen millions of social media trading posts, in order to constantly gauge sentiment.
We’re just scratching at the surface with these three examples, there’s many other positive developments in an industry that’ll constantly move forward and evolve and as it does, in order to maintain its viability, it’ll have to become even more consumer focused, which (inevitably) will directly lead to potentially successful trading for clients.
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