With currency markets staying relatively calm, FX brokers are putting more effort into improving their trading platforms instead of adding niche currency pairs. Their goal is to keep traders engaged by boosting liquidity, introducing advanced trading tools, and offering cost-effective hedging options.
Volatility Trends in Forex Trading
Currency market fluctuations have picked up slightly over the last six months. The Deutsche Bank Currency Volatility Index climbed from 5.97 in July 2024 to 8.16. But traders still remember April 2022, when the index surged to 13.44. With no sign of a return to those levels, brokers are adjusting their strategies to keep traders active.
According to Kourosh Khanloo, Director of Corporate Strategy at Tradu, major currencies like the USD, EUR, and GBP might be more stable, but opportunities still exist elsewhere. Emerging market currencies such as the Chilean peso, Indian rupee, and Korean won can experience sharp movements, giving traders alternative markets to explore.
Improving Services Instead of Expanding Products
Rather than launching new exotic pairs, brokers are upgrading their platforms and technology. Pete Mulmat, CEO of tastyfx, highlights how rapid scalping tools and real-time spread tracking help traders manage costs more effectively.
Ross Maxwell, Global Strategy and Operations Lead at VT Markets, points out that copy trading and social trading platforms have become more advanced and user-friendly. Some brokers now offer pre-configured algorithmic trading tools designed for specific market conditions.
David Morrison, Senior Market Analyst at Trade Nation, notes that exotic pairs often come with liquidity issues and higher spreads, making them less appealing. Instead, brokers are focusing on keeping spreads low for major pairs to maintain trader interest. Filip Kaczmarzyk, Board Member at XTB, agrees, saying that liquidity is the key to attracting traders rather than simply adding more currency pairs.
Steve Sanders, EVP of Marketing and Product Development at Interactive Brokers, supports this approach. He believes that brokers should provide platforms where traders can adjust their strategies rather than pushing exotic instruments.
Demand for Cost-Effective Trading Strategies
When volatility is low, many traders prefer traditional instruments like forward contracts because they are cost-effective. However, these contracts can be inflexible. Options-based strategies offer more flexibility but tend to be more expensive.
Daniel Fiore, Senior Trader at Monex, argues that innovation should focus on improving market access with deep liquidity, tight spreads, and fast execution instead of introducing niche products. Chris Weston, Head of Research at Pepperstone, agrees, saying that while new instruments may be attractive, they won’t replace mainstream currency pairs.
Weston also notes that in low-volatility conditions, traders adjust by using tighter stop losses and increasing position sizes. With smaller price swings, traders often hold positions longer, which can sometimes lead to better results. However, he dismisses the idea that traders will shift to highly volatile exotic pairs, stating that those markets mostly attract experienced traders adapting their strategies rather than new traders looking for riskier trades.
Finding Opportunities in a Stable Market
Even in a quiet market, traders can benefit from cost-effective hedging strategies like vanilla options, where premiums tend to be lower. Brokers are also attracting high-frequency traders by offering reduced spreads and lower trading costs.
Ross Maxwell of VT Markets points out that while some traders switch to rangebound strategies, these often result in fewer trades and higher risks. Increasing leverage to profit from smaller price movements is another approach, though it requires careful risk management.
During calmer periods, many traders also focus on carry trades, profiting from interest rate differences. Pete Mulmat of tastyfx notes that while overall trade volume may drop in low-volatility conditions, traders often use limit orders at multiple levels to optimize their entries.
As market conditions evolve, brokers are refining their platforms to offer deeper liquidity, better execution, and transparent costs. Rather than introducing more exotic currency pairs, they are focusing on tools and services that help traders navigate the current environment effectively.
