Have you been looking at the Forex market as your trading destination? In this case, you may wonder whether Forex will last forever. In the high-risk environment where losses are many, why do people still engage in Forex trading? It is also surprising that about 96% of traders in the Forex trade end up losing their money.
Several unregulated brokers in the market make it very difficult to trust the system. Traders are often cheated of their money and end up with difficult losses. However, if you are careful to pick a regulated Forex broker, your money will be in safe hands. Further, the right Forex knowledge dealing with economic fundamentals and technical indicators can equip you to trade in this market well.
Given the above complexities, people often wonder will Forex trading last forever. Read ahead as we discuss why this may be the case. In other words, yes, Forex trading will most likely last forever. We break this down for you below.
Restricted Forex Trading
While the Forex trade is poised to last forever, some countries may place restrictions on the trade. In general, the Forex market is a worldwide market where traders can exchange currencies and make profits. Forex trading is generally carried on for commercial, trading, and tourism purposes worldwide. Transactions of more than $5 trillion are made every single day, and these are only increasing.
While the Forex trade will continue, several countries consider the trade to be illegal or place several restrictions on trading. These countries include Pakistan, Japan, Turkey, and Saudi Arabia. Other countries, including Belarus, Canada, and Japan, have similar restrictions.
Many countries find this essential as only 4% of the traders stay put in this market in the long run. Due to the high risk involved, this market is viewed as a gambling space by several countries, and hence highly regulated.
Further, when given leverage by brokers, losses tend to feel smaller. This is another reason as to why several countries look at it as gambling. Another reason as to why Forex trading in some countries is restricted is because they have fixed currency exchange rates. Forex trading in these environments become difficult and are hence regulated or banned.
The restrictions involve trading only with domestic brokers and the like. These restrictions may make it look like Forex trading may see its end someday. However, this is not the case, and Forex trading will continue forever.
Reasons for a Lasting Forex Market
Here are a few of the reasons as to why the Forex trade is poised to last forever.
Low Investment Needs
For new or experienced Forex traders, this market requires only a minimal investment to get started with. Some Forex brokers even let you trade with a sum as low as a micro lot. Brokers let you begin trading by investing as little as $100. For this reason, several people are drawn to Forex trading.
Brokers also let you have demo accounts using which you can practice the trade before you begin trading. Following this, a trader can start the micro trading account for small trades. This lets them learn the trade in the actual trading world with smaller amounts.
Through this, traders learn crucial risk-management skills. Following this, they can begin trading in larger amounts. This generally means a switch from a micro trading account to a regular account. This low initial investment factor drives many people towards Forex trading. This will keep the Forex trading market working for a long time.
Low Spreads in the Market
The Forex market is designed in such a way that transaction costs are included within the given price. These are called spreads, and several brokers offer low spreads. It is as simple as the difference between the selling price of the currency and the corresponding buying price. For this reason, Forex trading is attractive and will likely last forever.
Liquidity Factor
In the Forex trading market, liquidity is very high. This simply means that currencies can be traded for other currencies very easily without any price discounts. This also means that the price movement is swift. Assets get converted into cash very quickly, and this makes the Forex market exceedingly attractive.
A Market that Operates 24 Hours
It is a market that operates during all hours in a day, making currency trades easy across the world market place. Hence, it remains operational 24 hours a day, five days a week. However, for retail traders, the forex market is closed on the weekends. During the weekdays, you can trade for all hours.
This simply means that a trader can pick a trading position and execute a trade at any time. Further, once you begin a trade, you can close at any time. Hence, it becomes a great option for traders who want to execute a trade at any given hour.
Further, even with individual trades, there is no given limit on how long the trades can remain open. This keeps the market non-stop and hence attractive enough to continue forever.
Forex Trading and National Currencies
One of the reasons as to why Forex trading will continue to stay is simply that there exist multiple currencies that require an exchange. Some countries have floating exchange rates and others have fixed rates. This gives rise to fluctuations across the market, and currencies always remain valued against each other. So long as this process remains, currencies will always be exchanged against each other, and the Forex market will continue.
So long as there is no one single unified currency in the global marketplace, currencies will remain trading. Further, past efforts to unify currencies have seen several economic and political movements against unification. This has also been so in the case of Brexit. For this reason, it is suggested that the Forex trade will continue forever.
Exchanging currencies also have institutional value globally. Governments can control inflation based on exchange rates, and banks can profit from the trade. Also, countries tend to have independent money due to currency exchange. For this reason, the global Forex market is likely poised to last.
Further, there also exist various digital currencies on the market that can take the place of world currencies. However, this seems unlikely, especially given the countries that have fixed currency exchange rates. Hence, it appears that the Forex Market will last forever.
Issues with Trading in Forex
All of the above factors tell us that the Forex trade is poised to last in the long-term. However, there are certain limiting factors to the trade. We have outlined these below.
Faulty Forex Signals
For any trader in Forex, using forex signals and indicators lets you make the right decisions at the right time. Indicators like the Stochastic indicator and other oscillators let you understand the forex market well. They help you occupy the right positions. However, if your signal provider is using faulty mechanisms, you will be given the wrong signals at any given time.
Hence, this can discourage people from trading in Forex and limit the forex market.
Brokers You Cannot Trust
Trading in Forex can be a safe venture if you approach regulated trading brokers. This will ensure that your money is safe. Regulated brokers will generally put your funds n safe segregated accounts that will not be used by them for any company operations.
However, in several countries, Forex markets are highly restricted, and people may be tempted to use unregulated brokers. Further, the pricing strategies of these brokers may prove especially attractive. For this reason, many people may opt for this and end up losing their funds outside the trade.
This limits the Forex market and keeps many people away.
Brokers and Leverages
Forex brokers offer leveraging services where you can borrow large amounts and trade in the market for only a little funding of your own. This makes the market especially attractive. However, it brings with it a high loss of risk and extremely heavy losses if the trade goes wrong. Further, as we’ve discussed, 96% of the traders in Forex tend to incur losses.
If people use the broker’s leveraging services without proper knowledge of the market, they will incur losses that will discourage them from returning. This makes the scope of the Forex market limited.
Summing It Up
Despite the challenges outlined above, the Forex market is generally poised to last forever. This is simply because the national and institutional interest in the market is too large to be ignored. International banks and financial institutions operate by trading in Forex. Further, currency exchange rates are used by man governments to manage inflation.
Given these large-scale advantages, Forex trading will last forever. For retail traders, the market remains operational 24 hours a day for five days a week. Further, it requires low funds for beginning a trade. For this reason, many traders find it attractive. Despite the high risk involved, returns are also usually high, and the spread is much lower. Hence, traders often opt for this market.
As noted, there are a few dangers of trading. However, regulated and practiced trading can help manage risks and losses much better. Hence, Forex Trading will last forever.