What’s new in Forex? — 2019 Expectations

As we reset our calendars for a fresh 365 days (358 as of today to be exact) for 2019, I can’t resist discussing my thoughts about the new year’s possible effects on the forex market. I can accurately remember how 2017’s financial story — the bitcoin bonanza — unfolded and had crippled the once ardent interest of retail traders for currency trading (at least in our company’s perspective). The pummeling of money into cryptocurrencies drove prices to insane heights but only to see its pioneer shed off 80% of its peak value from 12 months ago today. Consequently, 2018 became more of a story of bitcoin’s possible comeback which unfortunately didn’t materialize — let’s put a strong emphasis on “yet.”

Make no mistake, I am no bitcoin hopeful. In fact, the noise that caused the stir up in the financial markets cost a lot of late-coming investors their hard earned money which is certainly not something I would jump for joy about. The euphoria, however, served as a lesson to all investors that perhaps it may be premature to dismiss our current financial system. So, while crypto trading agonizes, this exposes us to the question about a market that we might have forgotten over the years: what’s new in forex? What can we expect in the good old currency trading in 2019?

2012 Flashback – How it was back then

Before I divulge my views on forex, let me take a brief journey back to late 2012 and discuss how the trading landscape seemed to me at that time. It was that year when online advertising about forex trading was (I guess) at its most rampant and the succeeding years followed through with the same relentlessness of brokers in alluring prospective clients — or even the casual browser.

It was only by mid-2018 when I noticed a significant tapering off of those cockamamie ads that pollute my email accounts and social media feed. One outrageous claim plastered in one of those ads stated that clients made thousands of dollars in just a few days, pretty much the same as what you would read on the papers the next day after someone wins the lottery.

To the callow eyes of undefiled internet users, these ads may present itself as a real opportunity to earn money. As the phrase for internet naiveté goes: it’s on the internet, it must be true! And believable it was. Throughout my career in the financial markets, numerous folks confessed to me about their experience with unscrupulous companies which had caused them a heap of dismay and an irredeemable investment.

The bans

July 2, 2018, marked the first day of the ban on binary option sales by the EU and a renewal of that prohibition was put in effect three months later. The binary options ban effectively stopped the trading of such a risky asset which apparently benefits only the seller of the product, not the investor. Several years before the European Securities and Markets Authority (ESMA) reached the decision to proscribe binary options, thousands of retail investors were duped into thinking they were partaking in a genuine opportunity to make money in the financial markets.

The mechanics of trading binary options is not originally malign, but the way it’s been redesigned to allow bets on price fluctuations of an asset by the minute is what caused it its bad name. On what technical or fundamental grounds could an investor predict the price of an asset (whether it’s going to go up or down) in the next few hours? And let’s not forget about the percentage of accuracy!

Even Facebook called for a ban on binary options trading, ICO and cryptocurrency trading advertising last year while noting that such financial products are “…frequently associated with misleading or deceptive promotional practices.”

Diminished Leverage

Last month, the Financial Conduct Authority (FCA) had also proposed to tone down the leverage ratio wherein leverage on CFD products will be limited to 30:1. Once the new rules are implemented, the insane use of leverage by retail traders will somehow draw to a close while potently hampering the”enhanced” revenue-generating abilities of brokerages. Still, other companies may choose to hang tough with its old practice offshore, beyond the reach of the FCA mandate.

Unattractive now for the $100 investors

The target market of forex ad campaigns in the past was primarily anyone with at least a $100 in their pocket with a desire to earn the same amount in a matter of days while sitting behind computer screens watching candlesticks blink red or green.

Despite the meager capital, brokers would fish for guppies like these as if they were tuna. It’s either the $100 is going straight to the broker’s pocket, which it will, or that sum of money will decrement over time and then go to the broker’s pocket gradually.

With that in mind, along with a lot less advertising going around, it may be hard for brokers to look for clients and vice versa. And retail traders with only a $100 to spare may not be equipped with the forbearance required for a less thrilling payout.

After all, who would spend three to four hours glued to a computer screen for a return –or worse, a loss– equivalent to a measly fraction of a hundred dollars?

Forex trading verdict for 2019

Piecing together all of these events and occurrences, my view about forex trading is so much different from what I saw six years ago. A more regulated CFD market emerges with a legion of better-informed traders, traders who have been hardened by their unfortunate experiences. If the leverage allowed in trading currencies among FCA regulated companies does drop to a maximum of 30, it provides a better safety net for investors.

Across the big name social media platforms, scams will hopefully be mitigated, and the perpetrators ensnared. I think all these results into a less jungle-like currency trading community where the actual trustworthy brokers who value client satisfaction over their own profits come out on top.

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