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The FX/CFD industry saw mixed results in the final two months of 2022, with December bringing a total drop in vital operational measures.
Following November’s surprising rise in the assessed worth of an average single deposit, December data revealed an unexpected decrease to $1,473 from $2,457. As a result, the financial industry finished up a year poorer than it had begun, at $1,893.
This article will decode multiple aspects of the 2022 forex mystery, which witnessed massive ups and downs. However, before we begin, if you are planning to start your forex trading journey, it is advisable that you go through the list of “the best forex brokers for 2023,” which is compiled by a team of forex experts and is also the most cited source in the forex industry which will help you choose a broker which is compatible with your requirements.
Average total deposits and withdrawals
The average first-time deposit likewise showed a clear downward trend. Its value fell from $2,319 to $1,679 during the year, reaching an annual low of $663.34 in August. Both data indicate that retail traders were highly cautious when depositing funds into their trading accounts.
The overall monthly readings followed a similar pattern. While the total value of deposits and withdrawals fluctuated during the year, the general trend was somewhat negative. In December, the average monthly deposit value decreased from $12,774 in January to $9,073. During the same time frame, the total average monthly withdrawal fell from $7,687 to $6,498.
Understanding the movement of the retail industry
How did retail traders react to market changes? Their average transaction count increased from 258 to 288 in 2022, indicating a rise in business. The Asian area was the most active in terms of most countries. China appeared at the top of our ranking four times, whereas the United States only did so three times. Asian traders perform significantly more transactions than any other market.
In summary, the FX/CFD business had a challenging year in 2022. While it rebounded from the downturn, it was harmed by other causes, such as the limited participation of traders due to more significant worldwide inflation.
Will the year 2023 be better?
While it’s too early to state how the year will be, let’s look at the trends that will help us understand the forex market.
Continuation of developing markets’ growth
Developing markets have been a primary driver of Forex’s growth in recent years. This trend is expected to continue until 2022. Due to their massive populations and expanding middle classes, countries such as China, India, and Brazil offer tremendous expansion potential.
This creates both possibilities and obstacles for brokers operating in these regions; on the one hand, there is immense development potential, but on the other, rules can be more stringent than in mature markets such as Europe or North America.
The development of artificial intelligence and automated trading
The application of artificial intelligence (AI) is spreading across all financial markets, including the foreign exchange market (FX). AI can be utilized in foreign exchange trading for recognizing patterns and anticipating price movements.
Several brokerages offer ‘auto-trading’ services that employ pre-programmed algorithms to conduct transactions automatically without human participation.
Expansion vs. pace
The volume of foreign exchange transactions is anticipated to continue expanding, albeit slower than in recent years. This is caused by various reasons, including weaker global economic growth and tightening fiscal policy by major central banks.
For specific currencies, it is anticipated that the US dollar will continue to be the most frequently traded currency globally, followed by the euro and the Japanese yen. The Chinese yuan will witness increasing trading activity as China’s economy opens up.
More rivalry is on the horizon
While retail FX trading has been for a few decades, the crypto sector is becoming increasingly innovative and competitive. Cryptocurrencies have attracted many day traders. FX brokers have struggled to provide adequate circumstances for day traders interested in crypto trading. Would these cryptocurrency exchanges pivot away from their primary offering and provide retail currency trading to their customers?
Traditional retail forex brokers face a challenge from the rise of cryptocurrency exchanges such as FTX. Cryptocurrency exchanges offer a significantly broader selection of assets than most forex brokers, including alien cryptocurrencies not traded on traditional financial markets. This provides traders with a far more comprehensive choice of assets to trade and enables them to capitalize on possibilities in the developing cryptocurrency market.
Restrictions and regulations
With the implementation of new laws that will have a significant impact on how brokers conduct business, the retail FX industry is slated to undergo substantial changes. Here is all you need to know about the forthcoming reforms and what they signify for the industry’s future.
One of the most significant transitions is the introduction of leverage restrictions for all retail investors. This indicates that traders will no longer have access to high amounts of leverage, which could result in less dangerous trading tactics overall. Adverse balance insurance will also become essential for all brokers serving European customers. This ensures clients’ total assets can never fall below zero, even if they incur substantial trading losses.
These legal changes will likely enormously impact how brokers conduct business. It remains uncertain how they will adjust to continue effectively serving their clients.
