Online trading on the rise amid increased market volatility during the pandemic

The COVID-19 pandemic has affected all aspects of our lives. Setting aside the health implications, twelve months ago we could have had no idea that the way we work and socialise would change so dramatically. In the world of trading, we’ve seen further market volatility – on top of the political shifts like Brexit and talks of trade wars and protectionist policies – setting up significant opportunities for traders in today’s world.

In April 2020, for instance, the price of futures contracts for West Texas Intermediate (WTI) crude oil fell below US$0 per barrel – representing one of the biggest price shocks of all time – following a glut in supply that meant buyers had nowhere to store new barrels. Anyone with the presence of mind to short the market (perhaps recognising the drop in consumer energy and fuel demand) stood to make a substantial profit.

For several years now interest rates have remained low, but 2020 has been like nothing before. There have also been fewer opportunities for lifestyle spending – holidays for many were put on hold this year and even eating out was looking less attractive, indeed impossible, for several months in the UK. The result? Many investors are seeing the attraction of online trading both as a leisure activity and as a way to potentially boost stagnant savings.

And it’s not just about the possibility of making money. Many of us have found we have more time on our hands. One side effect of lockdowns has been more time spent at home and potentially more opportunity for boredom to set in if we don’t find something else to occupy our time. While some have embarked on a new fitness journey, some have increased their recipe repertoire and others have started learning about retail trading. Consequently, we’ve seen many new entrants to the trading scene.

Of course, anyone considering embarking on a trading journey needs to remember that where there is opportunity, there is also risk. Understanding how to manage the risk and make sensible decisions is key to a positive experience.

Education – alongside risk management tools which offer clients the chance to protect their investments and limit their exposure – must be at the forefront. Customer support is key. Brand new traders should be contacted on sign-up and receive dedicated local language support. It would be poor business sense to write off a first-time trader with a small deposit who could turn out to be a long-time customer with a large disposable income, so all new users should be treated equally.

If traders are well informed and have everything they need to succeed, they will do well, make money and continue to trade. Ultimately benefitting the broker as well as their customers.

But is this just a passing fad? If these traders are going to continue trading long term, it is critical that the trading experience is good. Regulated brokers are interested in long-term partnerships, returning customers and positive feedback.

So, what can we expect in the future?

Of course, predictions are far from simple, but it seems likely that we’re in for more of the same in terms of challenges for the global economy. Interest rates will likely stay low and as we’ve seen already this year, volatility provides attractive market conditions so trading will continue to offer opportunities for many looking to invest. While this provides a good business climate for brokers, we’re likely to see more sophisticated risk management tools designed to open up the industry to a wider audience – attracting more first-time traders alongside the old hands.