The relevance of the forex market to the global economic structure can be assessed from the fact that it edges out even the stock market to be the largest financial market in the world, and has a daily volume of more than $6 trillion. We find forex traders in every part of the world, and almost every country has shown immense interest in developing their economic strategies and policies to provide a more stable environment for the growth of the forex industry.
However, over the course of the last year, the forex market has suffered huge dents because of the severity of the global pandemic. Covid-19 has not only crashed markets but has also led to major economic fluctuations throughout the world. Unfortunately, it is predicted that these percussions will be felt for a long time to come in the world of business and finances. The negative impact of the pandemic on the forex market meant that many traders lost a fortune of investment, and along with this, many brokerage companies also lost tonnes of clients. All in all, it was a complete loss for the market because these brokers majorly drive the cash and trade flow in the forex industry. Credible and reputable brokers, like the CIMA regulated brokers, are a major source of assistance for the trading community.
Change in trading strategies
Many traders and investors have shifted their strategies during the pandemic to minimize the risk of losses. However, experts believe that this will hurt the market in the longer run. People are now day trading in the forex and the stock market. It has become a highly popular strategy since the first quarter of the last year. Traders believe that they can cover their losses through this practice, and also, beginner traders usually initiate their careers with this practice.
However, this means that the market does not experience any stability, as people are refraining to invest for a longer time frame. During the pandemic, people are trying to make profits by instantly buying and selling stocks and shares within a limited time. Furthermore, global news, reports, and developments are also a major driving force for the shift in the attitude of the traders. Hence, this can strictly backfire on the forex market in near future.
Forex volatility in 2021
At the start of the year 2020, many analysts predicted that the low volatility of the forex market can have major percussions on the market in the future. However, the unexpected and unprecedented events of the global pandemic shifted the market environment. The global pandemic ensured that the market volatility is high now as compared to the end of 2019. This means that the market will still endure high risks while leveraging high volatile bets.
The trading activities have significantly increased during the later stages of the pandemic. People also turned into investing in the booming forex market towards the end of 2020, eyeing it as an opportunity to make up the lost investment earlier that year. The market volatility was a directly influencing factor in this steep rise of trading activities. However, with every passing day, new Covid-19 variants, waves, and vaccinations, the forex market is still expected to unfold in a different manner. However, new lockdowns are expected to keep the market volatility higher in the forex industry.
