FX BOOK REVIEW
FXTM How do you see the retail forex trading market evolving in the next 5 years?
JP The renewal in market volatility among the major pairs should bring a lot of old traders back as well as a large new crop of traders from emerging and developing countries.
The market will grow again at (at least) single digit rates and retail FX volume worldwide will reach US$400 billion per day in 2015. Although not a certainty, I think that copy trading has the potential to become a fad that largely dies out because most of the firms offering this key concept are allowing new traders to potentially follow dumb/ irresponsible traders – which sours the experience and disposition of trade followers in general.
Spreads will continue to narrow, following the experience in Japan where spreads are quoted at 4 decimals for yen pairs and 6 decimals in non-yen pairs. We will need to start quantifying spreads using something other than pips because pips are no longer a small enough measure.
This means that quoting screens and order modification windows will also change and, hopefully, will stop displaying too many decimals
64 FX TRADER MAGAZINE April - June 2013
which change multiple times per second.
Lastly, regulations will continue to change the landscape – perhaps opening up retail FX trading in China, India, and Brazil – and brokers will increasingly be forced to
be regulated. It will
be interesting to see if the UK Financial Conduct Authority (the successor to the UK FSA) will choose to regulate FX and CFD brokers with less accommodation than what was shown by the FSA. If so, it will have a large impact for retail FX in Europe.
FXTM Do you think retail
traders will
have access to the same technology than professional traders?
JP Not the same, but equally advanced. The technology needs of
professional/institutional
traders are not similar in many respects to the technology needs of sophisticated retail traders. The technology in terms of liquidity transparency and solid, super-fast execution will basically be similar for both retail and institutional traders, but improvements in workflow and back-office technology clearly will benefit institutional (not retail) traders. I do see colocation as something where sophisticated retail traders are seeking to emulate institutional
FX traders. But here is the rub, this kind of retail trader might have better trading infrastructure than what his/her broker is offering to most/all clients. I believe that brokers will start to respond to the colocation needs of discerning retail
traders without requiring
minimum deposits of US$50,000 or more.
FXTM What would be your first advice to someone who wants to start trading currencies (apart from “read The Forex Trading Manual and get your forex trading licence”)?
JP My
first word of advice would
be to let them know that it is very tempting to start trading a live account without being truly prepared. My second word of advice would be a challenge for them to break the trend of dumb retail traders who start trading live too soon and only learn the important lessons after they’ve lost the bulk of their investable assets. I believe people can rise to that higher threshold of preparation and go on to become proficient in this great FX market.
The Forex Trading Manual is published by McGraw-Hill and is available in both paper and digital formats here:
Paper version
Amazon Kindle version iPad/iPhone/iPod Touch
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