What’s Behind the Rise of Retail Trading?

The recent rise in daily forex trading volumes have largely been driven by an increase in retail traders, who have been empowered by technological advancement and continued innovation.

This wider fiscal trend has been borne out by the recent attempts by Reddit communities to influence major financial markets, with one particular group helping to drive up ailing GameStop shares by a staggering 69% on January 22nd. Trading GameStop shares was subsequently halted nine times, before the inevitable correction sent stocks plunging.

But why has retail trading become so popular of late, and what power and influence do such individuals wield in the forex market?

Why is Retail Trading so Popular?

Aside from the way in which innovation has removed many of the barriers to entry that once surrounded the forex market, what other factors have inspired the rise of retail investors?

To begin with, the coronavirus pandemic has certainly been a factor, particularly with more people working from home and boasting improved work-life balances. Not only this, but the closure of retail and leisure outlets have diminished people’s ability to spend their disposable income, encouraging some to seek out accessible entities such as the forex market.

However, the rising popularity of retail trading has been prominent since before Covid-19 breached the UK’s shores, so there are clearly other factors in play. 

One element has been increased understanding of forex market volatility, which underpins currency exchanges across the globe. This, combined with the derivative nature of currency trading, enables investors to profit from volatility and the individual price movements that occur every day.

Thanks to the rise of online forex brokerage sites that educate and inform users in real-time, people now understand the fundamentals of the market and the role of the deterministic mindset, helping them to access lucrative and margin-based investments that can generate money fast.

Introducing the YOLO Generation – The New Breed of Forex Traders

It’s no-coincidence that the rise of retail forex trading has coincided with the coming-of-age amongst Millennials, whose youngest demographic members recently turned 18.

This demographic, which is referred to commonly as the ‘You Only Live Once’ (YOLO) generation, boasts a unique mentality when it comes to spending. More specifically, they’re not inclined to sacrifice or delay gratification in the present moment, regardless of the economic climate in which they live.

Given that Millennials have had their spending opportunities diminished during the coronavirus, however, this demographic has sought to invest money that it would otherwise have spent, seeking out volatile and relatively high-risk markets that generate increased returns.

It’s this type of aggressive and disruptive trader that also participates in online communities, adopting a collaborative approach amongst like-minded investors that seeks to influence financial markets and drive increased, short-term profits.

The rising influence of young Millennial traders is supported by findings from the Deutsche Bank, which revealed that almost half of US retail investors in 2020 were completely new to the financial markets. 

Make no mistake; the YOLO generation represents the forex traders of tomorrow, while they’ve undoubtedly precipitated the recent rise of retail trading across the globe.