Every
trader knows that diversification in financial markets is a crucial element of
success, and employing various trading strategies can pay off. The old market
saying was confirmed by the latest data from the retail trading
Retail Trading
In finance, retail trading refers to individual traders, trading through a broker, or on a platform. This can include novice traders and experienced traders. Trading and investing are divided into two categories, retail and institutional. Institutions include investment banks like JP Morgan or Citibank and global central banks like the US Federal Reserve and the European Central Bank. When we talk about retail trading however, we usually are referring to forex trading, but there are retail trade
In finance, retail trading refers to individual traders, trading through a broker, or on a platform. This can include novice traders and experienced traders. Trading and investing are divided into two categories, retail and institutional. Institutions include investment banks like JP Morgan or Citibank and global central banks like the US Federal Reserve and the European Central Bank. When we talk about retail trading however, we usually are referring to forex trading, but there are retail trade
Read this Term platform, Capital.com, which shed light on an emerging trend in the UK. Specifically,
those who adopted a mix of both long and short trading positions during the
first half of 2023 outperformed traders who chose a single-direction approach.
Capital.com
analyzed the performance of almost 5,000 active traders during the first six
months of 2023. The data showed that traders executing both long and short
trades had better returns than those sticking to just one side of the market.
Only 42% of
short- and 46% of long-only traders made a profit. In contrast, traders
employing both long and short strategies saw more than 50% profit. For
those utilizing a mix, the optimal long-short ratio ranged between 50% and 70%
in favor of long positions. The study reported a -13% ROI for long-only traders
and a -8% ROI for short-only traders. Meanwhile, mixed-strategy traders showed
a relatively strong -0.9% ROI.
“Markets
never move in one direction forever and the first half of 2023 showed this to
be true,” Daniela Hathorn, the Senior Market Analyst at Capital.com, commented.
“As markets walked a tightrope between economic recovery and lower stock market
returns, UK traders responded by moving away from long-only or short-only
trades to incorporate both long and short positions to their trading
strategies.”
This
indicates that combining both strategies is advantageous in the current market
environment, which has been bearish overall but punctuated by sharp rallies.
Shifting Retail Trading
Behavior
Data also
indicate a significant shift in the behavior of retail traders in the UK. The
percentage of long-only traders on the Capital.com platform dropped from
previous years, falling from 44% and 50% in past years to just 28% in the first
half of 2023. This decline suggests that retail traders are increasingly avoiding
a long-only bias.
“Our data
affirms how UK traders are adapting their strategies as we enter what appears
to be a bearish market where opportunities to derive value from rising markets
are reduced,” Hathorn added.
In the
first half of 2023, UK traders were frequently net-long on stocks like Bed,
Bath & Beyond and AMC Entertainment Holdings. However, they expressed a
net-short sentiment in FX pairs and major indices like the DAX40 and Dow Jones.
“2023 has
seen the resurgence in meme stocks with new players coming onto the scene.
Despite the 2021 fan favorites having been crushed since their heyday, it’s
common to see traders flock to the popular meme stocks in case they are also
part of the resurgence in risk appetite,” the Senior Market Analyst at Capital.com
concluded.
The data
highlights the need for diversification and not relying on bullish-only
strategies. The poor performance of long traders signals traders may need to
acquire new skills, including short selling.
Time and Diversification
Boost Retail Traders’ Profits
Another recent
study by Capital.com, released in June, shows that traders who spread their
investments across multiple asset classes and hold positions for longer
durations see better returns.
Table: Trading commodities first gave the highest success rate
|
First asset |
Median success rate |
Average (mean) success rate |
% of users |
|
Shares |
44.44% |
46.65% |
25.85% |
|
Forex |
50.00% |
56.81% |
11.89% |
|
Commodities |
52.75% |
58.55% |
21.61% |
|
Indices |
51.35% |
54.99% |
9.69% |
The study, which analyzed the trading activities
of 100,000 global clients from May 2022 to April 2023, revealed that such
diversified traders were successful in 60% of their trades. On the other hand,
traders who specialized in a single asset class saw profits in just 48% of
their trades.
In other
company news, the executive team has had several key changes over the past few months.
Simone Manni was recently named the Head of Commercial Marketing for Europe. Before
that, Niamh Byrne, formerly of IG Group, was appointed Head of UK and Ireland. Additionally,
Greg Adams has been hired as the Head of Risk, further strengthening the
leadership team.
Every
trader knows that diversification in financial markets is a crucial element of
success, and employing various trading strategies can pay off. The old market
saying was confirmed by the latest data from the retail trading
Retail Trading
In finance, retail trading refers to individual traders, trading through a broker, or on a platform. This can include novice traders and experienced traders. Trading and investing are divided into two categories, retail and institutional. Institutions include investment banks like JP Morgan or Citibank and global central banks like the US Federal Reserve and the European Central Bank. When we talk about retail trading however, we usually are referring to forex trading, but there are retail trade
In finance, retail trading refers to individual traders, trading through a broker, or on a platform. This can include novice traders and experienced traders. Trading and investing are divided into two categories, retail and institutional. Institutions include investment banks like JP Morgan or Citibank and global central banks like the US Federal Reserve and the European Central Bank. When we talk about retail trading however, we usually are referring to forex trading, but there are retail trade
Read this Term platform, Capital.com, which shed light on an emerging trend in the UK. Specifically,
those who adopted a mix of both long and short trading positions during the
first half of 2023 outperformed traders who chose a single-direction approach.
Capital.com
analyzed the performance of almost 5,000 active traders during the first six
months of 2023. The data showed that traders executing both long and short
trades had better returns than those sticking to just one side of the market.
Only 42% of
short- and 46% of long-only traders made a profit. In contrast, traders
employing both long and short strategies saw more than 50% profit. For
those utilizing a mix, the optimal long-short ratio ranged between 50% and 70%
in favor of long positions. The study reported a -13% ROI for long-only traders
and a -8% ROI for short-only traders. Meanwhile, mixed-strategy traders showed
a relatively strong -0.9% ROI.
“Markets
never move in one direction forever and the first half of 2023 showed this to
be true,” Daniela Hathorn, the Senior Market Analyst at Capital.com, commented.
“As markets walked a tightrope between economic recovery and lower stock market
returns, UK traders responded by moving away from long-only or short-only
trades to incorporate both long and short positions to their trading
strategies.”
This
indicates that combining both strategies is advantageous in the current market
environment, which has been bearish overall but punctuated by sharp rallies.
Shifting Retail Trading
Behavior
Data also
indicate a significant shift in the behavior of retail traders in the UK. The
percentage of long-only traders on the Capital.com platform dropped from
previous years, falling from 44% and 50% in past years to just 28% in the first
half of 2023. This decline suggests that retail traders are increasingly avoiding
a long-only bias.
“Our data
affirms how UK traders are adapting their strategies as we enter what appears
to be a bearish market where opportunities to derive value from rising markets
are reduced,” Hathorn added.
In the
first half of 2023, UK traders were frequently net-long on stocks like Bed,
Bath & Beyond and AMC Entertainment Holdings. However, they expressed a
net-short sentiment in FX pairs and major indices like the DAX40 and Dow Jones.
“2023 has
seen the resurgence in meme stocks with new players coming onto the scene.
Despite the 2021 fan favorites having been crushed since their heyday, it’s
common to see traders flock to the popular meme stocks in case they are also
part of the resurgence in risk appetite,” the Senior Market Analyst at Capital.com
concluded.
The data
highlights the need for diversification and not relying on bullish-only
strategies. The poor performance of long traders signals traders may need to
acquire new skills, including short selling.
Time and Diversification
Boost Retail Traders’ Profits
Another recent
study by Capital.com, released in June, shows that traders who spread their
investments across multiple asset classes and hold positions for longer
durations see better returns.
Table: Trading commodities first gave the highest success rate
|
First asset |
Median success rate |
Average (mean) success rate |
% of users |
|
Shares |
44.44% |
46.65% |
25.85% |
|
Forex |
50.00% |
56.81% |
11.89% |
|
Commodities |
52.75% |
58.55% |
21.61% |
|
Indices |
51.35% |
54.99% |
9.69% |
The study, which analyzed the trading activities
of 100,000 global clients from May 2022 to April 2023, revealed that such
diversified traders were successful in 60% of their trades. On the other hand,
traders who specialized in a single asset class saw profits in just 48% of
their trades.
In other
company news, the executive team has had several key changes over the past few months.
Simone Manni was recently named the Head of Commercial Marketing for Europe. Before
that, Niamh Byrne, formerly of IG Group, was appointed Head of UK and Ireland. Additionally,
Greg Adams has been hired as the Head of Risk, further strengthening the
leadership team.