Factors that inhibit the popularity of Forex in numerous countries
Finance → Stocks, Bond & Forex
- Author Giorgi Mikhelidze
- Published July 9, 2020
- Word count 981
The past few decades have been extremely important for the development of the financial industry globally. The entire ecosystem has shifted from a traditional industry that did not use much digital technology to a completely web-based sector. The picture has completely changed today as the financial industry is proud to be one of the most digitalized sectors on earth. This has helped the development of many rural areas globally whilst making financial services more accessible and affordable to millions of people.
When thinking about the digitalization of the financial sector, the first thing that comes to mind is commercial banking. Unlike just a couple of decades ago, making a money transaction or performing a basic financial operation required going to the bank branch, waiting in the queue, and then engaging in a lengthy process with the staff. All of these can now be done by simply swiping one’s smartphone and using the mobile application. This has become the new normal and we got quite used to it. Even thinking of what the process was like not long ago is difficult as we have completely adapted to the new reality.
Nevertheless, commercial baning or insurance companies are just the surface of the big change. Forex trading has benefited significantly throughout the process of rapid digitalization. This sector has been around for quite some time now. A long list of now extremely famous billionaires and philanthropists have started doing their business by forex trading. One of those people is a globally recognized businessman, philanthropist, and educator George Soros. The 89-year-old made the first bits of his $8 billion fortune out of Forex trading. Now, he is one of the most influential personalities in the field, having donated more than $32 billion to open foundations throughout his lifetime.
Forex in the digital era
Unlike back in days when George Soros started trading, the forex market has become much more accessible for anyone who is willing to invest their money in it. The internet has made a gigantic network of forex trading platforms possible. Therefore, now anyone can trade from any part of the world. As a result of the soaring access to the internet globally, more and more people start trading. Yet, the entire sector is not just based on the spreads and luck. To become a successful trader, one needs to have sufficient knowledge and preferably experience.
Unfortunately, many people compare forex trading to gambling, citing that one is completely dependent on luck. The truth is that luck plays minimal to no part in forex trading. One with relevant knowledge and experience in the field can make big amounts of money out of trading. Nevertheless, this is not the way to achieve overnight success. There is the misconception that forex trading can make people rich overnight, but that is simply not true. Rather, success in forex is determined by months and sometimes years of sleepless nights lost money and continued efforts.
Nations globally are striving to enable for more forex operations within their jurisdictions. Some of the most developed countries like the United Kingdom, Denmark, and Australia are implementing laws aimed to foster the sector. However, many countries, particularly in Asia, Africa, and the middle east are falling behind.
Emerging countries that are rapidly developing try to support the forex industry. One of the best examples is Georgia, a small country located on the crossroads of Europe and Asia. The former Soviet republic implemented liberal laws that aim to attract investors not only from Georgia but from overseas countries. Moreover, the nation made quite a few changes to adapt to the crypto industry and even became one of the largest crypto mining hubs in the world, thanks to the company like Bitffury. So is there a pattern? Why is Forex not as popular in some countries? Or why are some nations not even legalizing it?
The big misconception - Forex sector’s affiliation with gambling
The biggest hindering factor for the popularity of forex is many countries is its misleading affiliation with gambling. Many people strongly believe that forex trading is all about luck and once you get in, there is no way out. For someone in the forex sector, this would sound simply funny. However, the issue remains serious and the industry should do more to address such allegations and misconceptions properly in efforts to fade them away. Otherwise, the trust and the overall image will remain blurry and dark for the general public of many nations around the world.
To put it simply, forex as a sector has an extremely bad reputation in many countries. This is primarily due to the fact that the vast majority of people who try trading lose money at first. As mentioned above in the article, losing money during the first period is simply fine. Forex trading requires lots of technical knowledge that is accumulated throughout the experience. Reading a textbook about forex will not make you an A-listed trader.
The fact that people ‘bid’ money and then lose makes the forex sector look and sound like a gigantic casino hall where rich people go to have fun. In reality, this obviously is not true. In countries where attitudes towards casinos are extremely conservative, forex is particularly tabooed.
Strict legal frameworks
One of the most important factors for forming a welcoming forex environment is the country’s legal framework regarding the matter. For instance, the United Kingdom is extremely open with an independent regulatory framework, supporting companies working within the market. However, this is not always the case in every country.
Even today, forex trading is completely forbidden in some nations. For instance, in Iran, one could be imprisoned for trying to trade with currencies. The situation is similar in the vast majority of the middle east and some nations of Southeast Asia. naturally, the popularity of forex is questionable in an environment where trading is outlawed.
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