Equity bear market could reverse retail FX trading lull
Concerns about the wider economy and its impact on disposable income have eroded individuals’ appetite for FX trading, despite attractive levels of volatility.
One of the striking themes of 2021, from a retail FX perspective, was the jump in the number of people trading currency for the first time. Almost one in four of the 139,000 individuals who placed at least one FX trade in the preceding 12 months were newcomers, according to the Investment Trends UK leverage trading report, and social media was teeming with influencers and brokers offering advice and paid-for services.
Fast forward to May 2022, however, and the latest Investment Trends data showed that the number of traders had fallen by 31% – even through a market period characterized by big themes such as the strengthening of the dollar, currency interventions and multi-year extremes in key currency pairs.
Part of the explanation for the change is the pandemic and its lockdowns. During the worst of Covid-19, many people were looking for extra income while they were on government support; some took the plunge into the world of trading.
Naeem Aslam, chief market analyst at AvaTrade, says that governments withdrawing their support resulted in a large number of retail traders leaving the market.