Traders have long sought ways to facilitate trading and maximise efficiency of their activities while obtaining access to maximum liquidity and opportunities through a variety of asset classes.
In the past, this may have meant that they dedicated entire days to their activities at specific locations to assure their proximity to market action and news. This was the case as early as the 1700s, when traders formed the New York Stock Exchange (NYSE) after previously gathering under a buttonwood tree on Wall Street in New York City to exchange stocks and other assets. With the NYSE, they could assure full-time access to exchange opportunities.
As a result, trading over time was mainly the purview of dedicated full-time traders and large institutions that could assure large trading volumes. Until at least the 1980s, trading was dominated by large-scale institutions that could afford sophisticated electronic access to markets. This often assured an inside line on the best deals by virtue of their size and specialisation.
While large institutions may still have an advantage in trading, the panorama of trading opportunities gradually changed. It now allows ever-increasing opportunities for individual traders, who in the past were at the mercy of their daily schedules, to obtain access to markets through mobile trading.
A Trading Revolution?
Beginning in the 1990s, the technological revolution brought by the internet and individual access to technology began opening the door for retail traders to a growing array of assets and financial opportunities.
One of the earliest online brokerages was E*TRADE, which opened its operations in 1991. Later, retail brokerage Charles Schwab began operating in the online segment and quickly became one of the most popular platforms for traders in equities. Following the success of online equities trading, the first online forex dealers also began operating.
Mobile Forex – A New Opportunity
Forex presents a relatively new and special opportunity for retail traders. Before the advent of the internet, forex trading was largely done by major banks, multinational corporations and exporters. But now, anyone with an internet connection can easily open a trading account.
The growth of mobile trading has accompanied an expansion in forex trading around the globe.
Daily forex trading volume in 2016 reached US$5.1 trillion (up from US$4 trillion in 2010), and spot market forex trading totaled about US$2 trillion daily.
Retail FX average daily volume increased to US$238 billion in 2016 from US$185 billion only three years earlier. Brokerages and dealers in equities and forex report that currently as much as 15-20% of all trades are made through mobile applications. Analysts believe that that number is likely to grow as tech-savvy younger generations become increasingly involved in trading.
An Expanding Universe
In the past, the idea of trading from a remote location in the mountains, or catching some time on a tropical beach during your travels while putting in an order for a trade, might have seemed like something of a fantasy. However, those scenarios are now totally possible—as long as an internet connection is available. Mobile-savvy traders are finding that rather than miss out on opportunities, they can use their time to maximise any potential advantages.
There are more than 4 million retail forex traders around the globe. Nearly 3 million of those are in Asia and Europe, with a smaller number for the U.S. With these large numbers, the potential for mobile trading to continue growing is significant.
What Is Needed?
Traders starting out can begin with a low capital requirement to open an account, sometimes as low as US$50. They will also need access to a mobile communications device, such as a cell phone, tablet or laptop, in addition to a secure internet connection.
Advantages Of Mobile Trading
Mobile trading can offer some specific advantages, such as research tools. These can include online news and price feeds that allow mobile traders to keep abreast of the latest developments and price action in specific markets. Thus, traders can dispense with scanning through newspapers or financial news websites to find relevant information for their trades.
There are also many training tools. These include simulators that help traders examine past trading environments through backtesting, or test their strategies using real-time market action. Often, dealers will allow traders to open a demo account before they actually begin trading so they can brush up on strategies.
Additionally, mobile traders can take advantage of education services and traders forums. In the past, traders may have had to pay thousands of dollars to attend specialised courses and spend years gaining experience to become successful. But now, they have access to online articles and commentary from specialists and fellow traders who can help give them a quick "leg up" on helpful strategies and new trends in trading.
There are a variety of analytical tools available, too. These can include special graphics to illustrate price movements, and chart analysis to show various types of moving averages, and volume and volatility indicators. With the availability of these tools, becoming an expert in forecasting possible price movements has become a much faster process. Traders are no longer entirely at the mercy of institutional specialists or trading gurus to execute successful trades.
Although mobile trading offers conveniences that can enhance a trader's experience, there can be some drawbacks and traders should carefully consider whether mobile trading is the best platform for them. Some of the most noted of disadvantages are the limited screen sizes of mobile devices and the resulting more limited amount of analytical tools that may be used on a mobile device at any given time. Also, depending on where and when they are used mobile devices may experience problems with connectivity that don't occur as frequently on devices with dedicated fixed-line communication. Traders need to be aware that if they experience connectivity problems, they may experience missed opportunities or possibly losses due to failure to complete orders in a timely manner.
While forex has always been a liquid market, the growth of mobile trading has meant that it has become more liquid. This is important because it means traders are able to enter the market at nearly any time to find a counterparty for their trade within a price range that they may be seeking. It also allows for tighter spreads that can save traders money.
Another advantage offered by modern mobile forex trading is easy access to leverage. Unlike other asset classes, where leverage may be limited to only a 4-to-1 ratio, leverage in forex trading can go as high as 50:1. That means traders have the ability to trade US$50 per position for every US$1 in their accounts.
With modern equipment and connections, traders are able to access a variety of markets at any time from practically any location around the globe and with leverage that can multiply gains. Given this, it makes sense to take advantage of mobility through increasingly convenient and available platforms that can help make trading more flexible, enjoyable and profitable.
Any opinions, news, research, analyses, prices, other information, or links to third-party sites are provided as general market commentary and do not constitute investment advice. FXCM will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.
Senior Market Specialist
Russell Shor (MSTA, CFTe, MFTA) is a Senior Market Specialist at FXCM. He joined the firm in October 2017 and has an Honours Degree in Economics from the University of South Africa and holds the coveted Certified Financial Technician and Master of Financial Technical Analysis qualifications from the International Federation…