25 Nov

How the majority of FX brokers are dealing with a second wave

November 25, 2020

By ForexNewsNow

In general, 2019 was not very successful for brokers in the Forex and CFD market. Low volatility and tighter regulation have led to a decline in client activity. In 2020, however, a very different story is unfolding. While other industries are struggling to survive the pandemic, financial markets are showing unprecedented recovery.

Is it possible to say that brokers are benefiting from coronavirus? If so, how sustainable is this success? According to the statistics during the first wave brokers dealt with the coronavirus really effectively and we can say the same about the second one as well. In this article, we will have a look at some indicators that characterize brokers’ activity on the Forex market.

Average monthly trading volumes

Many brokers felt the effects of the volatility associated with the coronavirus outbreak back in February. The most notable jump in trading activity was recorded in March.

When we talk about brokers we should definitely mention Africa, where the pandemic significantly affected the economic situation in big countries. The second wave was especially harsh in South Africa, but South African Forex brokers showed no sign of slowing down in trading, and the number of people involved in trading only increased. We can say this about other countries like Nigeria, Uganda, Zimbabwe.

Thus, many trade service providers reported an increase in trading volume during the second wave, which was perfect for Forex brokers, some even reaching record highs as the pandemic continues to stimulate investor activity. This is clearly seen on trading volumes.

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This is what the data says, but what do the brokers themselves say about it? To find out the mood in the industry and get the big picture, we can have a look at brokers.

The more terrible the epidemic, the higher the volumes

Jeffrey Siou, chief operating officer of ATFX Group, said customers have become more active on all trading platforms because of the coronavirus outbreak.

Financial markets have been very volatile over the last three months, which has created a lot more trading opportunities for short-term traders. Many clients took advantage of price fluctuations in major financial markets, including Forex, indices, commodities, and other assets.

Fabian Chui, head of risk management at ADSS, stressed that many traders have not seen such volatility in their entire careers.

Volatility in financial markets was unprecedented due to simultaneous shocks on the supply and demand side. The escalation and severity of the pandemic took the market by surprise, which led to a significant increase in customer trading activity.

“We saw a surge in intraday trading as customers tried to catch the bottom and cash in on volatility. At the same time, clients are adjusting their positioning and risk management to reflect volatility, taking into account the experience gained during the 2008 financial crisis.”

Conclusion

Forex industry is one of the fields that possibly remained untouched during the first and second waves. Because of its unique features and convenience people are able to trade almost anywhere in the world without a physical presence. Hence brokers did not really have any problems with organizing themselves during the pandemic.

By ForexNewsNow


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