Presently, the Forex market constitutes the largest asset class in the world. With average trading volumes that hover near $5 trillion dollars per day, the Forex market has a level of liquidity unequaled by any other asset class. Where, however, will the Forex market be 100 years from now?
The best way to arrive at that answer is by looking at the Forex market through some of its most important component parts.
Level of Access to Retail Traders
Up until the 1990s and the internet revolution, retail Forex trading was practically non-existent. Since then, through 2015, there are over four million retail Forex traders worldwide. With industry leaders, such as CMC Markets, leading the way in the innovation in trading platform technology, the accessibility to the Forex market by retail Forex traders is certain to increase over the next 100 years.
Not only will the continuous innovation by industry leaders help to spur the growth in the number of traders, but so too will the common sense notion that areas in the world presently identified as emerging markets will, within 100 years time, become prosperous and fully emerge as part of the first world economy. With such economic leaps come huge increases in the population of their middle class demographics. It is this demographic that accounts for the majority of entry-level retail traders. As such, with an increasing middle-class population worldwide, the number of retail traders is highly likely to sustain a constant level of increase.
This increase in retail traders will continue to fuel the penetration of the retail sector into the overall Forex market. Presently, retail traders account for approximately 10 percent of the Forex market. In 100 years time, this percentage is certain to be larger. With a larger presence will also come increased access to preferential price quotes. Level-III quotes, highly coveted and exclusive today, could very well be the norm even for small entry-level traders in the future.
Change in Forex Market Turnover
Forex market turnover, in terms of the most tradable currencies, will inevitably change over the next 100 years. This would be attributable to changes in the current economic paradigms. As an example, one can find compelling arguments for why the Euro will disappear within a decade’s time. The events sparked by the recent Brexit vote in the United Kingdom illustrate how suddenly paradigms can shift. Likewise, arguments and counter-arguments for the leading role of the U.S. Dollar can also be found. This is indicative of the dynamic nature of world history and the market environment which it spawns. Look at the financial section of any newspaper from 100 years ago and you can easily see how different the economic landscape was then compared to how it is now. This is prone to hold true 100 years into the future as well.
Shifts in energy reserves and how those commodities are priced are likely to change affecting such stalwart currencies as the U.S. Dollar. Emerging markets will mature and begin to take on more prominent roles in the world economy, thus affecting the demand and value of their respective currencies. China by that time would most likely be the largest economic power in the world, giving the Yuan a new level of prestige.
The Evolution of Forex Trading Signals
Presently, most Forex trading signals are based on technical analysis and algorithms designed to determine the best possible entry and exit point for traders. The advances in computer processing power 100 years into the future will likely make such signals entirely the foray of artificial intelligence (AI). Whereas today, trading signals rely heavily on humans for their initial calculation and on computers for their implementation and logical extrapolation, the trading signals of tomorrow will likely be generated entirely free of human participation.
The “socialization” of trading signals is also likely to increase concurrent with the advances in AI-generated signals. Presently, social trading signals which are user-generated in nature are in their infancy. With what is certain to be a continuous expansion and development of social networks and the mindset that goes along with their usage, social signals will become something that traders expect. As such, Forex brokers and dealers will begin to take on some characteristics of social networks today. This will result in trading platforms that are far more intuitive and create a hybrid of trading signals that incorporate the non-human world of AI and the very human world of social media.
Of course, only time will tell how the world of Forex will be like 100 years from today. Many things that one might take as given will never come to fruition. At the same time, other unexpected innovations will revolutionize it in ways entirely unfathomable to us today. What is certain to hold true, however, is that the trading volumes and level of liquidity found in the Forex market will continue. As such, Forex will remain the universal asset class of interest for retail and institutional traders worldwide.