What is Forex and How Has Technology Changed it?
While daily forex trading volumes may have fallen in recent times, an average of $5.1 trillion continues to be spent during each 24-hour period. This highlights the enduring popularity and the liquidity that exists within the marketplace, even during times of austerity and economic decline.
While this is one thing that has not changed over time, however, in many ways the forex market has evolved considerably during the last 20 years. This is thanks largely to technological advancement, which has changed the way in which financial traders operated and created wealth of opportunities for potential investors.
In this post, we will look at how technology has changed forex trading during the digital age and the impact that this has had on investors.
Removing the Barriers to Entry
Forex trading refers to the buying and selling of currency, which is usually traded in major and minor pairs as explained here. It is a liquid asset that is traded as a derivative, meaning that investors can operate without the burden of ownership and generate profits even in a depreciating market. It is this that makes forex trading so popular, although its complex and volatile nature means that it was once only accessible to Wall Street traders and large corporations.
Technology has changed this, however, as the development of online trading platforms and affiliated mobile apps has broken down many of the barriers that once surrounded the market. Not only has changed the role of brokers and transitioned the delivery of this service online, for example, but it has also made the foreign exchange universally accessible and reduced the costs of trading. As a result, trading currency is now a viable way of earning part-time income, enabling aspiring investors to hone their skills while they maintain a day job.
Making Trading Safer
We have already touched on the volatility of the forex market, but technology has also helped traders to minimise risk and operate with greater security. Today’s online trading platforms offer users access to demo accounts, for example, which simulate real-time market conditions and execute orders without risking their hard-earned money. These can be used for up to six months, and they enable traders to hone their skills and translate theoretical knowledge into hardened, practical skills.
Virtual platforms are also constantly evolving to meets the needs of modern traders, with live news feeds and real-time analysis now available to help forex traders make informed decisions. This is crucial given the changeable nature of the market, as live price movements and breaking macroeconomic trends can turn even undermine even logical trades. Technology has also allowed traders to apply stop-losses to their forex accounts, meaning that trades can be automatically stopped once they have begun to incur a certain level of loss.
The Last Word
While these examples showcase just how technology has changed the forex market, it barely scratches the surface in terms of the impact that innovation has had over time. This trend is likely to continue into the future, with mobile applications becoming increasingly prominent and virtual trading platforms offering an even more comprehensive service to investors.