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Forex and crypto traders take on huge financial risks, says FCA

  • The FCA’s recent study shows crypto and forex traders take on huge financial risks
  • The traders invest based on guts
  • Most traders believe losses are part of the investment process

The forex market is worth trillions of dollars daily, while the cryptocurrency market is becoming more mainstream. The younger generation is more interested in the cryptocurrency and forex market, and the United Kingdom’s Financial Conduct Authority believes they take on more risk than they should.

Forex and crypto traders do it for the thrill

A study by the Financial Conduct Authority (FCA) revealed that most cryptocurrency and forex traders do it for the thrill. According to the findings, cryptocurrency traders consist of a young, diverse bunch who make trading and investment decisions based on their guts.

“The research found that for many investors, emotions and feelings such as enjoying the thrill of investing, and social factors like the status that comes from a sense of ownership in the companies they invest in, were key reasons behind their decisions to invest” the report added.

Most of the investors access these high-risk financial assets via new investment apps. The FCA stated that most of the traders don’t invest in the crypto and forex markets because they want their money to work for them or save for retirement.

The research revealed that most of the investors have high confidence and claimed knowledge. However, most of them are not aware of the risks of investing, or they don’t believe in them. More than 50% of the polled investors said they accept losing money as part of the risks of investing, despite most of them losing their entire capital in the markets.

Traders usually endure huge losses

According to the FCA, the high-risk products are not suitable for the young traders and investors. “However, there is evidence that these higher-risk products may not always be suitable for these consumers’ needs as nearly two-thirds (59%) claim that a significant investment loss would have a fundamental impact on their current or future lifestyle,” the report added.

In certain cases, such as contracts for differences, the investors lose more than they invest. The survey showed that 78% of the respondents trust their instincts when it tells them it is to buy and sell.

The new class of investors also has a more diverse audience, with various characters. Most of the women in this category are under 40. The newer set of investors also rely more on contemporary media (e.g., YouTube, social media) for tips and news, the FCA said.

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