As today is World Wide Web day, celebrating all things web browsing and online activity related, we've decided to take a look back and answer the question of 'how has the internet changed forex trading?'
The $5 Trillion A Day Market
Foreign exchange trading has ballooned in recent years, exploding in size over the 2000s to become the 5 trillion dollar/day market that is is now. The biggest driver of the rapid increase in liquidity in the market has undoubtedly been the internet. The same tool that allows endless happy users to watch videos of cats playing with dogs from the comfort of their beds is now also helping mums, retirees, college students and professional traders alike gain access to this vast wealth of opportunity.
Once Upon A Time...
So, how did it all start? Quick history lesson here for you. Traditionally Forex trading was carried out by investment banks on trading floors and over the phone. Think the money-hungry scenes in Wall Street and you get the idea. The introduction of the internet in 1982 lead to the development of electronic trading systems. Now, over the late 80s and early 90s, these electronic trading systems ballooned in popularity, meaning that investment banks and hedge funds etc could now access prices from the screens of their computers and no longer needed to be on the trading floor! As the popularity of electronic trading grew, many of these trading floors eventually became obsolete and Forex trading moved virtually entirely from the floor to the screens.
Making A Change
While many traders, struggling to get to grips with this new technology, lamented the sudden shift in their world, this change also brought about some positives. For the first time in history, ordinary people were able to access Foreign exchange trading via online platforms which were being offered by brokers. These retail traders, consisting of regular people, were now able to trade the global currency markets from their beds. Well before memes and cute puppy videos would become a distraction.
Lift Off
Internet trading surged in popularity over the early 2000s and really took off following the global financial crisis in 2008. As of 2016 it was estimated that retail trading accounted for nearly 6% of this mammoth $5 trillion dollar a day market. So, with retail trading growing in popularity seemingly by the day. What are some of attractive aspects of this new way of making money?
Easy Access
As we touched on earlier, one of the biggest draws of online Forex trading is that it can be done from virtually anywhere. Provided you have internet access. This offers retail traders the opportunity to make money from home. The ultimate goal of most retails traders is to be able to make enough money to give up their jobs and trade from home full time. I know what you’re thinking “How could I give up my glorious 2 hour a day commute? I love being squashed on the bus and then the train… and then the train.. and then the bus” – I’m sure you would cope.
Freedom
The progression of technology has taken this ease of access in other directions recently. While online trading once meant sitting in front of the dull, electronic hum of a desktop computer, laptops meant that people could take their trading with them and work amongst the struggling novelists and internet trolls in coffee shops and cafes. Recently, the advent of mobile trading and tablet trading means that traders can quite literally always keep an eye on the markets. This makes it even easier for traders to take advantage of the opportunities the forex market offers each day.
Easy to learn
The growth of the internet has also made it even easier to learn how to trade forex. Once upon a time, learning to trade meant buying big, heavy, expensive textbooks and hoping your own lust for cash would outweigh your boredom and tired eyes. Now, not only can you learn how to “contour like Kim Kardashian” or “cook the perfect steak” but you can also watch trading tutorials online or even undertake interactive trading lessons over the internet. This has made the process of learning to trade far, far quicker and far less mind-numbing.
Automatic Trading Programs
The internet has also created another incredibly attractive aspect of trading which is, the automatic trading program. Now, while there are those of you who undoubtedly crave the knowledge and skill of being a master trader, I know there are also those of you would simply like to earn. And, earn fast. Online traders can even get ready made systems called expert advisors (or EAs for short) that they can sync up with their online brokerage systems to automatically trade for them. Which they can then monitor on their tablet as they walk down leafy, quiet streets looking at all the big houses they’d like to buy. You've even got Virtual Private Servers that make sure your expert advisors are always connected!
Closing Thoughts
You can see clearly that, as with most things, except human attention spans and social interactions, technology has made trading better. No longer does trading have to be an aggressive, sweat-smelling, throat rupturing activity in crowded trading floors, undertaken by only the elite. Now, quite literally anyone with a bank account and an internet connection can trade. The online industry itself continues to grow every day and I for one look forward to seeing what technology will do for this digital rush next. Happy trading folks!
Please note that this material is provided for informational purposes only and should not be considered as investment advice. Trading in the financial markets is very risky.
Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
Past performance is not indicative of future results.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 75% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.