Volatility Boosts Forex Trading Investment

Despite a recovery in yields across asset classes such as equities and real estate, the liquidity and volatility of the forex industry remains attractive to regional investors.



The GCC has registered a strong rebound in the last year, with most asset classes in the region outperforming global peers. Stock markets have peaked and real estate prices have skyrocketed.

Despite the strong appeal of these traditional investment options, forex trading (FX), a relatively new player on to the scene, has maintained its appeal regional investors, thanks to a range of advantages, said industry experts.

“We have seen good rental yields and price appreciation across real estate in the UAE, however investing in an apartment or villa requires a major financial commitment over a period of time – and not all investors have the appetite or means to do this,” explained Gaurav Kashyap, head of futures at Alpari Middle East.

“On the other hand, trading in the FX markets can be done with a principal investment as low as $1,000 – and the use of leverage allows the investor to chase those higher yields available in other asset classes. With a smaller deposit and similar return, investing in the FX markets makes natural sense,” he said.

Another factor that has helped FX attract investors is increased volatility in the market.

“The drop in emerging market currencies, the changes to sterling, dollar and yen, all offer very good opportunities – and as always with FX it is a very liquid market which is easy to enter, trade and exit,” stated Philippe Ghanem, managing director and vice- chairman of ADS Securities.

“Investors who have found other asset classes to be illiquid or subject to irrational market moves will stay trading FX and look to take advantage of the current volatility,” he added.

The FX and commodity market sees over $4 trillion transacted daily and is the most liquid asset class in the market. The 24-hour nature of the industry also allows investors the flexibility to trade at their convenience, stated Kashyap.

One key factor that has helped the FX industry expand its reach is improved technology.

“The role of technology is huge in our business. And recent developments have completely revolutionised the way retail investors trade,” said Kashyap.

“State-of-the-art trading platforms that are easy to understand and navigate along with the evolution of mobile trading has opened the door to a new breed of investors who were earlier unable to access the markets.”

Alpari recently launched bhe MetaTrader 5 platform, delivering charting capabilities for DGCX products and allowing clients to access by-minute, hourly and daily charts.

Late last year, ADS Securities also launched OREX, the first FX trading platform to be developed in the Middle East. It offers new-generation technology, fast pricing and is designed as a multi- asset platform, according to Ghanem.

“We have invested, and continue to invest, millions of dollars in technology,” he added.

Despite the growing popularity of the industry, there are issues that need to be addressed immediately to enable further expansion.

Ghanem explained: “There are three main challenges in the industry: price, service and regulation.

“The challenge in the industry is where brokerages try and offer very tight pricing and claim that there are no transaction costs. With this model it is impossible to make money as all brokerages have costs.

“If brokers come to the market and offer low pricing because they have not invested in technology and regulation, they will tarnish the reputation of the industry.