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The Popularity of Forex Trading in Developing Countries

Forex Trading

The Popularity of Forex Trading in Developing Countries

byPremium Times
March 10, 2020
3 min read
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The OTC Forex market is known to all. The daily trading turnover of this segment is about seven trillion dollars. The bulk of operations are carried out by major banks, multinational corporations, investment companies, and large hedge funds. Individual participants in the Forex market like Alpari account for only about 5% of the turnover. It seems insignificant, but in numerical terms, it amounts to $250 billion. What is the contribution of Forex trading in Nigeria, and why is this business popular there?

It may sound odd, but in the nineties of the twentieth century, there were a few private traders. It is with the development of communication technologies, their number began to grow rapidly. Also, Forex brokers appeared and provided access to currency trading to individuals.

Forex Brokers in Developing Countries

In developed capitalist countries, exchanges have existed for a long time; the activities of brokers and exchange speculators on stocks there have been considered common for centuries. Since its appearance in the 70s of the twentieth century, the new foreign exchange market quickly fit into the existing financial system of European countries, British dominions, the United States, and Japan. Already in the nineties (with the advent of personal computers), the Forex industry has become a common thing in these countries.

In other countries, this technology’s inception began much later. Moreover, this happened unevenly across countries due to differences in their economic development and national characteristics. In the countries of the former communist system and the socialist camp, financial systems were re-created, so market relations did not have traditions there.

Forex Trading
Forex Trading

At first, Western brokerage companies did not even want to serve customers from these countries. Therefore, there were local Forex brokers who took into account the level of knowledge and financial capabilities of their citizens.

Forex
Forex

The Forex industry began to develop in those countries that were former colonies of European states. Thus, Forex is currently popular in Southeast Asia – Vietnam, The Philippines, Indonesia, Singapore and some African countries like South Africa, Nigeria and Egypt. Special attention deserves Nigeria, which is rapidly developing in this direction. Along with the growth of incomes, many began to trade forex.

The Reasons for the Rollout of the Forex Industry

There are a couple of reasons for the rapid spread of Forex trading with any commodities in developing countries.

1. Availability
To start trading, it is enough to have a computer, laptop, or smartphone with Internet access — no need to search for the trading office near you. Information about training at any level is available to everyone, and start-up capital can be minimal. Access to other financial markets is much more difficult. It is simplicity that determines the huge popularity of Forex trading. Beginners do not need to deposit large amounts and can practice on a demo account.

2. Leverage
Access to the market with small amounts was made possible thanks to leverage. Private traders come to Forex only intending to make money on changing exchange rates — this is what Forex signals. They do not need the currency they buy; they are only interested in profit. On the other hand, Forex brokers are interested in attracting new customers with any investment reserves.

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3. Technological progress
The rapid development of computer technology and the Internet has enabled Forex trading from virtually anywhere in the world. The software has been greatly simplified, and trading terminals have become intuitive to any literate person. Moreover, trading programs do not even have to be installed on a computer. Online platforms are accessible from any browser. Trading with mobile devices has become commonplace.

4. Liquidity
Forex currency is the most liquid commodity in the world. There are small differences in the liquidity of currencies of different countries. But this is regulated by higher commissions from low-liquid currencies.

5. Communication features
The rapid spread of the Forex industry has been made possible thanks to the Internet. In addition to the fact that the business is done via the Internet, social networks and forums have gained great importance as well. The first acquaintance with the Forex market is now happening through numerous groups on Facebook, targeted advertising, and communication on forums. Besides, the language barrier is practically absent. Forex brokers duplicate their sites in many languages; training and technical support are also available in all common languages.

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