The flood of Gen Z and millennials entering the retail trading market has been cited as one of the most noteworthy trends in the financial world in recent years. The rise of retail trading platforms and rising volatility around major economies certainly encouraged many young traders to enter the markets. This new wave of market participants has brought liquidity to the retail trading markets that were previously unavailable. But can Gen Z and millennials really gain financial success through retail trading? Let’s find out!
What exactly Is Retail Trading?
Retail trading is a segment of the larger financial market where individuals aim to profit by speculating on the exchange rate between different financial instruments. The process of buying and selling financial instruments can be completed within seconds in retail trading. With the advent of online trading, anyone can access the global marketplace through an online broker and make trades in the same way as banks do.
By logging onto the broker’s website, individuals can deposit their funds and bet on the long-term or short-term direction of the exchange rates. The broker functions as the intermediary to these bets, similar to a bookmaker. The retail brokerage, however, offers leverage: allowing clients to borrow more money than they have deposited to enhance the profitability of their trading positions.
As brokerage retail trading platforms and their easy accessibility on the internet have become more widespread, the retail trading industry has been growing exponentially. Beginner retail traders can gain experience and comfort with a demo account before risking actual funds. It is impossible to find a profession that offers a better trading lifestyle than retail trading. While getting there isn’t easy, if you’re disciplined and determined, you’re more likely to succeed.
Gen-Z and Millennials dominate the Retail trading trend
Millennials and Gen Z were raised in a world of computers and technology and are often seen as confident, entitled, or narcissistic. In general, they do quite well at multitasking and are heavily dependent on the internet. The role and impact of fintech among millennials and Gen Z are quite evident, compared to previous generations. The use of technology has become ingrained in so many aspects of retail trading.
Modern day retail trading combines almost all aspects of financial technology, from account management to electronic transactions, statistical analysis, and data protection. Without financial technology, retail trading would still be confined to Wall Street tycoons, yuppies, and investment bankers. In this day and age, traders have access to a wide variety of assets and trading instruments and can trade them quickly and easily from the comfort and convenience of their homes. They can also benefit from faster order executions, secure payment methods, better market analytics, and a safe trading environment.
Several reports indicate that individuals under the age of 34 are becoming more open to the idea of trading. Furthermore, the current economic climate and financial uncertainty have led to a greater willingness to take risks for trading youngsters.
In light of the high volatility of the retail markets, ease of access, and sensitivity to global conditions, it should come as no surprise that millennials and Gen Z will try to capitalize on it. Moreover, since retail trading doesn’t require a lot of capital to start, but is capable of giving substantial returns, it is not surprising that more and more youngsters prefer retail trading over other financial investments.
Since Gen Z and millennials seek immediate satisfaction, retail trading provides them with a means to achieve their goals immediately, if market conditions are favorable. Read How Gen Z Can Profit from Turbulent Economic Times if you’re among them wondering what’s going on and how to capitalize on it.
Day Trading is one of the major attractions!
One of the greatest benefits of day trading is the potential to make a considerable amount of profit within a short period of time. Many of Gen Z and Millennial traders are starting their trading careers by day trading, which is indeed a great way to learn trading by seeing the market’s reaction immediately. Since Gen Zers never shy away from taking risks and are always willing to take a chance, day trading offers a good entry point for them into retail trading.
In spite of the fact that day trading is applicable to all financial markets, this retail trading strategy is mostly used in the forex market. Forex day traders typically take advantage of price fluctuations of currency pairs with high liquidity, which can provide plenty of profit-making opportunities.
It is, however, important to understand that day trading can be a risky endeavor. Day trading may seem "easy" to some, but there is a good chance that you will lose money as well.
Throughout history, we have been taught that the younger generation is innovative, forward-thinking, and ready to transform past institutions into better ones. The majority of these traits are admirable. However, this isn’t true when it comes to the financial market, and those who believe this are often in for a harsh lesson.
Ultimately, yes, some Gen Z investors will make a good sum through day trading, regardless of whether it is a result of skill, luck, or both of these factors at work. But historically, day traders have always lost money in the vast majority of cases. Surviving in the day trading market is not an easy undertaking. As a day trader, you must keep an eye on a screen, calculate the numbers, watch trends, and decide what to do each day based on the market movers. That’s the nature of the day trading game!
Day traders should not engage in leveraged investment strategies unless they understand the risks they are taking, the economics, and the performance of leveraged products or options.
Here’s a look at the definitive guide to Forex Day Trading For A Living and whether it’s a good strategy for Gen Zers who want to make it big.
How can Gen Z take advantage of its first bear market?
The majority of Gen z and Millennials who began investing two years ago are currently experiencing their first bear market. None of their first preferred financial instruments like cryptocurrencies, NFTs, e-commerce IPOs, or stocks — have escaped the wrath. While some of the first-timers are exiting the market in the hope of being able to re-enter when it peaks, there are still some profit-making opportunities available in retail trading for those who are willing to take a chance. The following are some of them.
1. Forex Trading — Currency Speculation
Forex retail trading is a segment of the foreign exchange market where a trader speculates foreign currencies in order to profit from exchange rates among different currencies. Rather than buying a currency for an import or investing in a foreign business, a trader buys it in anticipation of selling it at a higher rate in the future (technically, when the currency “appreciates”).
Globally, the Forex Market moves $6.6 trillion worth of transactions every day, making it the largest financial market in the world. With forex traders all over the world actively buying and selling currency pairs at all hours, it is a truly global marketplace with tons of profit potential. The accessibility of forex trading is one of its biggest advantages. Because it does not require a large initial investment, it is popular with hobbyist traders who are looking for a relatively easy entry point. A Cent account is the most appropriate one for beginners.
The reason forex trading stands out during recession times is that it is a very different type of investment than stocks. In forex trading, you buy and sell a currency pair, which means you expect one economy to outperform another. If your expectations are accurate, you may be able to earn a nice sum. Additionally, you can profit from both long and short positions. A trader can “go long” when they expect a currency price to rise in the future. They can also go “short” when they believe the price will fall in the near future.
Still, got questions? Here are the 5 Top Reasons to Consider Forex Trading During the Recession that you should know about.
2. Portfolio Diversification — Proven Risk-Reduction Strategy
Financial markets are always going to fluctuate depending on consumer perceptions and confidence at various times of the year. There will be periods in which some of your holdings will lose money, regardless of how much you wish for them to soar. This must be compensated for by diversifying. As a trading strategy, portfolio diversification involves spreading your holdings across a variety of assets to limit your exposure to one type of financial instrument. Your portfolio will become less volatile over time if you follow this practice.
Diversification is a risk management strategy aimed at reducing risk and improving portfolio performance. You can not only survive economically during a crisis if your investment portfolio is flexible enough to keep your holdings balanced or sufficiently diversified to mitigate the risk of change, but also thrive on the road to financial independence if you have a sufficiently diversified trading portfolio.
This strategy, however, has one major disadvantage. What if a trader is not proficient in a wide range of asset classes, but just a few? There’s a way out! In retail trading, it is possible for a trader to diversify their portfolio not only through different assets but also through a single financial instrument. Take a forex portfolio for an instance.
Forex often comes up when people discuss portfolio diversification, and this is for good reason. Forex portfolios offer a wide range of currency pairs along with a variety of assets that include Stocks, Cryptos, Indices, Metals, Energies, and Commodities worldwide that can be traded. Since forex trading has depth and profits returns that are hard to match, it can be the ideal way to keep your portfolio balanced.
3. Consider Investing — Think Long Term
While millions of people struggle financially, some well-off investors also see their portfolios suffer as their assets decline. When you enjoy a certain level of financial security and live paycheck-to-paycheck, recessions can be great times to make long-term investments. In spite of the current gloomy economic situation, if you plan to invest for the long term, there is plenty of reason to be optimistic.
Two key implications should be considered by long-term investors.
1) Perform thorough research to identify businesses that have a good chance of surviving a recession.
2) Keep in mind that recessions offer the best opportunity to purchase securities through stock trading. It is more likely for you to succeed if you have fewer risks and a larger upside.
All of these factors do not matter if you suffer financial hardship due to the recession. It is highly likely that things will get worse before they improve. If, however, you are lucky and your life will not fall apart, you should try to take advantage of these markets. Here are a few factors to prove why the present is a great time for long-term investments that offer significant returns.
Choose A Reliable Trading Platform
To join the world of retail trading, one needs to choose a trading platform or brokerage that offers secure accounts and reliable trading conditions. AximTrade stands out as the best broker in terms of its reliability and excellent trading conditions, offering Forex, Stocks, Crypto, Indices, Metals, and Energies, with advanced MT4 technology and a Copy Trade solution.
Start trading online with the Trading App, the ultimate mobile application designed to help you manage your trading profile, make deposits, and control your real and demo trading activities. This fast and easy-to-use forex trading application allows you to access your trading account whenever and wherever you want.