Along with the development of technology, there have been many trading revolutions that make market participants must be alert and keep learning.
Both in terms of internal and external, the forex trading revolution happens every day.
Starting from a small policy made by one broker to new regulations that change trading activities as a whole.
In the past decade, the world of forex trading has changed. These forex trading revolutions are based on emerging trends, technology, changes in laws and regulations, and so on.
Let’s check out 5 trading revolutions that hit the world of Forex trading:
Extreme Impacts of News and Geopolitical Factors
It is undeniable that the geopolitical tension, the global economy, and the impact of the past financial crisis to date have made traders and investors even more uneasy.
As a result, price changes in all markets are increasingly sensitive to fundamental news releases. Volatility and geopolitical risk caused by terrorism, changes in economic policy, trade opportunities from the turmoil of Brexit, and divisive political rhetoric.
News and geopolitics are now the main catalysts that drive the market every day.
Even in 2020, the whole world is being hit by a COVID-19 pandemic that is destroying the economic sector massively. Many traders are confused when their technical indicators show lots of fake signals. Thus, they realize that they need fundamental and Intermarket analysis at this moment.
In the past, forex trading was very complicated. It was not only because of the high price but also because the trading infrastructure was not as sophisticated as it is today.
In the pre-internet, you must first call the broker when you want to open and close a position. This is very impractical.
Then when the internet was discovered, the trading platform suddenly froze when it would execute the price because of a slow connection.
The traders were afraid because they were not sure that their position was missing or right. That is why an internet connection is a forex trading revolution that has hit the world.
According to Life Hack, internet makes human life easier and safer than before. We can access anything easily today.
Because of the Internet as we know it today, forex trading is much easier to access. Besides, there is no longer the monopoly of a handful of people.
Trading Technology through Smartphones
At present, forex trading does not have to be done in the broker’s offices or fixed on a large screen. Currently, you can even trade only through your smartphone.
Various trading applications are popping up. Besides, technonolgy has created new ways of analysis and indicators every day.
At this time, you no longer need to sit in front of the phone, carrying sheets of paper that are prone to missing, or neat grooming to become a forex trader.
Trading hours have become more flexible because we can place pending orders and sleep well when the New York market opens. Later when we wake up, we can check the trading results as easily as reading a message.
Various Central Bank Monetary Policies
In the first point, we have understood that the news and geopolitical conditions became one of the forex trading revolutions which had a big influence.
Furthermore, incidental events that have rarely occurred in the past determine the modern era forex trading. The changing patterns of human life have made the central bank more active in market interventions. One of them occurred during the COVID-19 pandemic at the transition from 2019 to 2020.
Central banks around the world are competing to issue monetary easing to help their economies. From Quantitative Easing to cutting interest rates, central bank policies are a catalyst that has the power to move markets, especially in the short-term timeframe.
New Margin And Leverage Rules
The dynamics of using margin and leverage is one of the exciting forex trading revolutions to follow.
At the end of 2015, the US National Futures Association (NFA) had tightened margin requirements to limit allowed leverage. Then, other forex regulators foloow this action.
This regulation change was a result of losses in January 2015. The Swiss National Bank (SNB) unexpectedly released its currency pegging against the Euro. This directly shows the high risk of margin trading.
Since then, NFA and other elite-class forex regulators have limited margin usage to around 50: 1. Also, they require the forex broker to write a trading risk notice on their promotional material.
Although there are still brokers outside the US that offer 200: 1 leverage, even more, NFA’s decisive step in limiting the use of margins makes forex traders more careful in choosing brokers.