Are you dreaming about making a fortune on the financial markets in 2021?
You’re not the only one.
There’s a loud noise about retail trading these days. Everywhere you look, you see people talking about financial markets. You see some YouTube gurus blabbering on how you can hop on the train and find Aladdin’s lamp.
Too good to be true, right?
But what’s behind this surge? Why are people going bananas over retail trading?
Well, let’s find out why.
All hail king forex
Even prior to Covid-19 and the impact that it had on the forex market especially, the forex was the largest market amidst others, and the sudden influx only made this a lot more substantial.
The forex market sees approximately $5 trillion worth in trades being executed daily from right around the world, which subsequently increases the market’s liquidity due to the constant exchange of currencies.
Forex brokers offer favourable trading conditions to traders interested in forex trading and seeing that the forex market never sleeps but operates 24/5, this adds to the influx.
An explosion of forex trading in Africa
One continent that dipped its foot in the forex trading pool more than anyone was Africa.
According to statistics, there has been a continued rise in forex trading in Africa.
The economic consequences of the Covid-19 outbreak enhanced connectivity, and the appeal of a more liquid, lower transactional cost instrument was cited by the blog as reasons for expanded and reinforced trade on the continent.
Home alone
Due to lockdowns on the continent as a result of the Covid-19 outbreak and subsequent attempts to contain its spread, many more people were confined to their houses to work remotely.
Unemployed
In contrast to working remotely, many people were left unemployed. So, they sorted new ways to earn a living.
Increase in connectivity
Increased access to enhanced Internet across Africa has attracted a large number of new forex traders who have signed up to trade on the established electronic trading platforms for quite some time.
High-liquidity
Finally, the forex market’s well-known high liquidity, low entry barriers, and low transactional costs allow almost anyone with internet access to trade forex through a retail broker.
Social media boom
Amateur investors have become more active with retail platforms in the last year, partly as a result of the Covid-19 but also as a result of the newfound flood of information from social media and access to the market via retail brokerages and platforms.
The catchy ads you see, adds to this perspective.
For instance, the events that occurred involving stocks like GameStop and AMC Entertainment in what is regarded as one of the first social media-driven and coordinated retail buying practices.
To put it into context, at the height of the GameStop debacle on 27 January, 24 billion shares were exchanged on US markets, breaking the previous record set in the 2008 global financial crisis by 4 billion shares traded.
Are people enjoying the fruits of this explosion?
Ok, we get it, why there is an explosion of retail trading, and from your grandma to your dog is talking about retail investing.
But are people really benefiting from this surge?
Well, not really.
Trying to make a quick buck by buying and selling stocks or forex pairs over a short period can backfire.
People are obviously drawn by the promise of big gains, but they are likely to suffer big losses.
You don’t want to hear from your buddy that they’ve just tripled their money on GBP/USD or on the meme stocks, but they missed the train.
Unfortunately, no one has a crystal ball (not even your favourite trading Guru) to tell you that the direction of the financial markets.
People try to spend too much time predicting an unpredictable future.
This is true for gambling, not investing.
For instance, you may buy and sell currency pairs on the news that BOE (Bank of England) will raise the interest rate of GBP.
However, many people or the “pandemic traders” don’t have time to read the news. They just assume and buy or sell.
That’s why most people are not enjoying the fruits of this retail trading surge.
The importance of Self-Investing
Ok, enough of this gloominess.
If you really want to accelerate in the world of retail trading, you need to understand the importance of self-investing.
All you need to do is learn about the markets, have patience, and have a thought-out trading plan. Don’t look for short-term profits, rather try to think of a bigger picture.
Lastly, don’t think of how other people are making money. The strategies that work for them may not work for you.
Bottom line
Factors like social media, unemployment, and accessibility, all include the rise of retail trading since the pandemic.
Many people want to ride this train, but a few want to have a basic understanding of the financial markets.