Sometimes dubbed “The last truly free market”, other times ‘The wild west of finance”, the forex market is a breath of fresh air for traders in some countries, while others face a multitude of challenges.
Although Forex (short for Foreign Exchange Market) has been around since biblical times, the advent of technology, social media and easy access to internet-connected gadgets has turned forex trading into a global phenomenon. There’s a variety of reasons to change one currency into another, with commerce, trading and tourism being usually the most favored domains.
The level to which a country has the skills, resources and technology to trade forex is subject to much debate. But while the US, Europe and Asia are still the top players on the market, emerging economies can provide a whole new set of opportunities.
US -Tighter Regulations and Safer Investments
Is forex legal in the United States? Short answer, yes, but it is highly regulated. Due to the Foreign Assets Tax Compliance Act (or simply FATCA) and the strict regulations that brokers need to comply with, effective trading mostly takes place between US brokers and US citizens. Nevertheless, New York is recognized as a major forex trading hub and probably the most well organized in the world.
One of the advantages of a stricter system is forcing traders to better control their investments. Because, as we all know, bigger leverage may trigger bigger losses. Despite its fame as “The Land of Opportunity”, the US seems determined to remind us that forex is about the long game and not a get-rich-quick scheme.
Europe – A Millennium-old Tradition
Europe is home to some of the top 3 forex regulators around the world, namely CySec in Cyprus, FCA in the UK and MFSA in Malta. Along with fresh players on the FX board (like Bulgaria, Romania or Russia), Cyprus stands out for its friendly investment policies, being sought after by investors from as far as China or Australia. Its relatively lax financial legislation has brought criticism to the insular nation in the past, which has recently taken steps towards strengthening its authority.
Probably the most exciting opportunity to come from the Old Continent in recent times was the prolonged Brexit campaign. The “will-they,won’t-they” dynamic between the UK and the European Union provided both entertainment and lucrative speculations for traders in both GBP and EURO.
The most important thing, as always, remains to find a broker that will help you properly navigate the regulations of your own country.
Asia – The Pearl of International Commerce
Recently, the Bank of International Settlements declared Singapore to be the number 3 forex trading hub in the world, after London and New York. But Taiwan is coming in hot, ranking as one of the countries with the largest forex reserves due to massive foreign investment. Australia and Japan are moving towards boosting their local market investments, while still keeping their doors open to foreign brokers who abide by their local regulations.
A particular aspect to keep in mind when dealing with Asian countries with a Muslim majority: the law of Islam prohibits giving or receiving interests in any form. As long as there is no interest element and deals are concluded immediately with some logical reasoning to expect a likelihood of resulting financial gain, there is no reason why Islam would prohibit online forex trading to happen.
Emerging Markets – Seizing the Opportunity
The growing importance of emerging currencies is attracting a lot of interest from investors. These developing markets typically experience an extended period of robust growth in the industrial production sector in addition to the expansion of their economy as a whole.
One of the best examples of this is what is now called “The Malay Miracle”, a set of economic reforms adopted by Malaysia shortly after its independence in 1957. Despite these attempts to modernize, forex in Malaysia is still in its infancy. According to topratedforexbrokers, while Malaysia might not have the global financial significance of its neighbour, Singapore, it has in fact built up a modern infrastructure fuelled by a robust and stable economy. This, in turn, has resulted in higher living standards and an increase in foreign investments and interests.
Also, South Africa recently began lifting its restrictions in regards to forex trading, meaning the ZAR will become an increasingly important market commodity in the following decade.
And of course, more news is coming in from Nigeria, a country that is experiencing its own demographic and economic boom, which announced that forex trading has really taken off during 2020.
Forex is a growing global business model and its tight connection with technology means it’s evolving constantly. New trends and markets emerge literally every day and can be an adrenaline rush for many investors. A sound strategy, a good broker, and disposable capital are essential in “playing” the FX and becoming a successful trader. Just remember, all good things come to those who wait.