Retail Trader Explosion In A COVID-19 World: Is This A Sustainable Trend Shift?

The COVID-19 pandemic has seen many new trends established that few could have predicted, plus some more obvious shifts. However, one of the less apparent was probably the explosion and growth of day-trading during the coronavirus pandemic.

Retail trader explosion in a COVID-19 world. Is this a sustainable trend shift
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This has been highlighted by the surge in clients for many of the top brokers and best trading platforms in the months since the pandemic began its global spread. Traders on the Robinhood platform in the US have seen success as highlighted here, whilst in the UK, IG Group (one of the UK’s biggest retail trading platforms), posted surging financial results for its 2020 fiscal year. But why has this happened and is this trend a short-term blip, or a more sustainable trend shift?

Why the retail trading explosion?

There are probably three main factors driving the surge in the number of retail trading clients across the globe, plus the accompanying aggressive increase in retail trading volume.

-Heightened market volatility

-The absence of sports betting opportunities

-Increased personal time due to lockdowns

Let’s look at each of these in turn.

1. Heightened market volatility

Global financial markets saw an explosion in volatility in March as the coronavirus pandemic spread into Europe and then the US. Global equity markets plunged, bond markets surged, and foreign exchange markets saw aggressive moves in different directions. Although institutional investors move to the side lines, this increased volatility has allowed day traders to move in and make quick profits (although undoubtedly sustain significant losses as well).

2. The absence of sports betting opportunities

The COVID-19 outbreak saw professional sports cancelled globally. All the major sports in the US were postponed, professional football leagues in Europe were suspended, the Tokyo Olympics were cancelled for 2020 as were the European football championships. this absence of professional sport also meant an absence of sport betting opportunities, and it would seem that sports gamblers were attracted into the world of financial markets day trading.

3. Increased personal time due to lockdowns

The coronavirus spread brought with it global lockdowns come up with individuals encouraged to stay at home, work from home, social distance and avoid personal interactions outside of their family units. This produced an increase in personal time, with many individuals seeming to be attracted by the potential profits from short term or day trading.

So, are these trend shifts short-term, or are there longer term implications?

Market volatility continued March through May, then subsided in June, but interest from the retail sector stayed high. Again, volatility has decreased in August, but again the day-trade phenomenon continues to impact.

Sports and sports betting have resumed, but again, this does not seem to have had a significant impact on the financial market trading volumes seen by retail brokers (though as mentioned volumes are usually lower in the summer months). Plus, the number of new retail clients continues to climb according to many sources.

Although lockdowns have been lifted, many individuals are still working from home and this is likely being a longer-term shift in the whole workspace dynamic. More companies are likely to allow their employees to continue home working, even if it is on a part-time basis. The greater freedom that come with this potentially new home working paradigm could see a sustained trend in individuals trading.

Furthermore, those that have been introduced to retail trading have likely been “bitten by the bug” and a significant percentage are likely to continue. The increased media coverage of the retail trading boom and the many success stories that are highlighted are likely to keep a heightened interest in the trading environment for the individual. But make sure you have the right broker for you, check out the FXExplained Best UK Broker Guide.

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