Information sharing, and copy trading is improving trading performance
Although retail trading is growing in popularity and the volume of trades and profits are increasing, institutional investors still have the upper hand when it comes to long term gains.
Why the gap? The biggest difference is access to information. Information in financial firms travels faster to the institutional trader, and in larger volumes. An average trader on Wall Street is hooked into Bloomberg and Reuters where each economic event is updated in 2 milliseconds. Goldman Sachs has hundreds of people analyzing the market daily and spreading the information internally. Hedge fund traders are also exposed to insider tips with friends close to the action.
Although huge volumes of data and analysis are also available online, it is a significant challenge for retail investors to know the best sources to trust, and how to sift through the sea of information to find what is really important. In addition there dozens of theoretical models that can be used to determine which influences currency values, and deciding which one to trust requires specialized knowledge.
One specific example of information used by institutional investors is monitoring of interest rates. This has the most immediate impact on currency values yet in most cases retail investors are not aware of its importance, or in some cases even its existence.
Wisdom of the Crowds
Social trading is the new dimension of trading. It allows retail investors to take a more active role by providing access to information and expertise. It removes the traditional barriers of “financial black boxes” and offers transparency on how their money is invested by providing real time data feeds of trades and access to experts to discuss trading strategies.
It provides a wealth of financial information shared by a large active investment network. At the heart of social trading is a large community of investors from all walks of life and from every region of the world. The rich diversity of people who invest their money creates the largest knowledge base of investment advice.
Traders recognize the value of tapping into a large and diversified knowledge base and as a result activity on social networks is increasing and the potential is already being realized.
Online communities are enormously popular and many believe that social networking leads to greater trading volumes. Datamonitor – the respected Internet research firm – says that over 50% of consumers are using online tools to make their financial decisions today.
Today, more than 60% of our registered users (eToro) consult with experts and follow their trading activity using the advantages of a fully transparent investment network, proving that social trading is transforming the way people trade by promoting online sharing and collaboration.
It’s this collective wisdom, often described of wisdom of the crowds that provides novices, trader and pros with valuable information to make more informed investment decisions.
How social trading works
Healthy social networks are self-regulating organisms, which instantly raise exceptionally successful traders to the surface. By engaging in active social networks, traders can quickly and easily identify the most successful traders with the highest percentage of profitable trades, highest overall gains, sorted by the currency pair or commodity that they trade. In addition there are detailed profit and loss statements with graphs and charts so traders can analyze individual trading performance the same way they evaluate the prospectus for any type of financial investment.
By sorting though a live database of top traders, users can choose the most appropriate trader to follow based on their profits, trading style, portfolio strategy and risk level. Social indicators can be used to determine which traders are advantageous to follow, including the number of followers and number of people actively copying their investment decisions. The rate of responsiveness and the level of a trader’s interaction with the circle of followers provide further information about a trader’s personality, performance and investment strategy.
In addition, traders can fully diversify their investment portfolio by dividing their invested capital across several selected traders, thereby creating a people-based investment portfolio driven by performance-based social trading, lowering their overall investment risk.
Social Trading is Closing the Gap
Analysis of online financial trades reveals that following experts and copying their trader can has a positive impact on trading performance. In order to quantify the success of social trading we made a comparison of performance between trades done as a result of social activity compared with overall trading success.
We compared the win ratio which is the percentage of profitable trades from the total amount of trades and average profit per trade. We can see that copied trades had both better success rates and better average profit.
In the first months since launching of the CopyTrade and CopyTrader™ function on eToro OpenBook we saw an improvement in the win ratio (profitable vs. unprofitable trades) of 8%-12% in all of the copy trading activities.
Furthermore we saw a strong improvement of tens and up to hundreds of percentage points in the P&L of traders and investors using the copy trading features on eToro OpenBook.
We suspect as social trading builds momentum and becomes a bigger precentage of the overall pie, the gap will contine to close. In the first few months since CopyTrader was launched, some experts have built a following of several thousand traders and the numbers keep growing. As experts gain more experience and a build a larger following, their expertise will be leveraged even further pushing overall retail performance closer to that of instutional investors.
The biggest advantage of social trading, is that success is not only measured in terms of finanical gain, but is also documented, tracked and shared so that others can learn and benefit from the specific trading strategies and techniques. The accelerated learning curve raises the bar on trading performance and makes forex trading a more trusted part of a retail investor’s portfolio.
for further information please visit www.etoro.com
Sterling steadies ahead of UK budget
By Ritvik Carvalho
LONDON (Reuters) – Sterling steadied against the dollar on Wednesday and gained against the euro ahead of the announcement of Britain’s budget for the coming fiscal year, which is expected to prop up the economy as it prepares for a reopening from lockdowns.
The pound was flat at $1.3967 by 0841 GMT, after falling to its lowest in 2-1/2 weeks on Tuesday. It was 0.1% higher to the euro at 86.45 pence.
In a budget speech at 1230 GMT, finance minister Rishi Sunak will promise to do “whatever it takes”, including a five-month extension of a huge jobs rescue plan, to steer the economy through what he hopes will be the final months of COVID restrictions.
Sunak has already racked up Britain’s highest borrowing since World War Two and he will turn to the bond markets again in his budget speech, saying the task of fixing the public finances will only begin once a recovery is in sight.
“We’re not expecting too many surprises when the Chancellor takes to his feet to deliver one of the most widely leaked budgets in history,” said Robert Alster, CIO at wealth manager Close Brothers Asset Management.
“The key focus will clearly be continued support for the economy, as we navigate our way out of lockdown. Businesses will be listening closely for the approach to business rates and VAT cuts in the coming months.”
Sterling is the best performing G10 currency this year, up about 2% versus the dollar as investors bet the speed of Britain’s vaccination programme will enable a faster reopening of its economy, which suffered its worst annual contraction in 300 years.
Relief over a last-minute Brexit trade deal signed with the European Union last year and a Bank of England that has pushed back market expectations of negative interest rates has also been beneficial for the currency, which only last week hit its highest in 2-1/2 years.
Analysts remain bullish, although in the long-term, investors may focus on Britain’s debt.
“Overall, the additional fiscal support announced should underscore the constructive outlook for GBP for 2Q, with further fiscal help facilitating the economic rebound and making GBP the outperformer in the G10 FX space,” strategists at ING said in a note to clients.
“We expect sterling/dollar to breach the $1.50 level in 2H21 and dips below $1.40 should be faded.”
(Reporting by Ritvik Carvalho; Editing by Giles Elgood)
Belgian soccer club Bruges plans to list shares on stock market
By Abhinav Ramnarayan and Sudip Kar-Gupta
PARIS (Reuters) – Belgian soccer club Bruges (Club Brugge NV) is planning to list its shares on the Brussels stock market, the club said on Wednesday, in what would be a rare initial public offering (IPO) from a team in Europe in recent years.
The club has filed its “intention to float” — which signals the launch of the IPO process — and intends to list an undisclosed percentage of the company on the Euronext Brussels exchange, according to a statement to investors seen by Reuters.
Grizzly Sports NV, a vehicle that will be owned by major shareholders Bart Verhaeghe, Vincent Mannaert, Jan Boone and Peter Vanhecke, is the selling shareholder in the transaction.
They have a combined shareholding of 94.34% prior to the offering, the announcement said. No new shares will be issued as part of the deal, meaning the club itself will not be raising any fresh funds through the listing.
Bruges, currently first in Belgium’s top league, was founded in 1891 and has won 16 Belgian first division league titles.
A handful of European football clubs have stock market listings. Juventus in Italy, Borussia Dortmund in Germany and Dutch team Ajax are high profile examples, while England’s Manchester United listed in New York in 2012.
Soccer financing has attracted plenty of investor interest recently, with private equity firms increasingly keen to invest in sports leagues and clubs who are battling with revenue losses due to COVID-19 restrictions.
Berenberg, Credit Suisse and JP Morgan are global coordinators on the Bruges deal and joint bookrunners along with Belfius Bank.
(Reporting by Abhinav Ramnarayan and Sudip Kar-Gupta; Additional reporting by Phil Blenkinsop in Brussels; Editing by Andrew Heavens and Keith Weir)
Britain to ease listing rules to buttress London after Brexit
By Huw Jones
LONDON (Reuters) – Britain will “modernise” its listing rules to attract more high-growth and “blank cheque” SPAC company flotations to London, Finance Minister Rishi Sunak said on Tuesday.
The London Stock Exchange is facing tougher competition from NYSE and Nasdaq in New York, and from Euronext in Amsterdam since Britain fully left the European Union on Dec. 31.
In a bid to keep London globally competitive after Brexit, Sunak commissioned a review of listings rules last November. It was led by former European Commissioner Jonathan Hill and will publish its recommendations on Wednesday.
“The review has more than delivered and I’m keen we move quickly to consult on its recommendations, cementing the UK’s reputation at the front of global financial services,” Sunak said in a statement.
The government faces pressure to act – it announced a fast-track work visa scheme last week for fintechs – after swathes of euro stock and swaps trading left London for Amsterdam and New York after full Brexit in December.
But asset managers and company directors warn about eroding corporate governance standards by easing listing rules.
“The recommendations in this report are not about opening a gap between us and other global centres by proposing radical new departures to try to seize a competitive advantage,” Hill said.
“They are about closing a gap which has already opened up. All the recommendations are consistent with existing practices in other well-regulated financial centres in the USA, Asia and Europe,” Hill added.
Two changes seek to move London in line with New York and other financial centres by allowing founders to list their company while still retaining significant control.
As widely trailed, Hill recommends allowing dual class share structures to give directors and founders enhanced voting rights on certain decisions, a move retail investor groups say is contrary to the “one share, one vote” principle. The minimum “free float” or amount of a company’s shares or in public hands would be cut from 25% to 15%.
Hill also recommends liberalising listing rules for special purpose acquisition companies or SPACs, whose flotations in New York have surged over the past year, with Amsterdam also attracting some recently.
The prospectus, used by companies to set out their initial or secondary offer of shares, should also be fundamentally reviewed, Hill has recommended.
There should also be an annual “State of the City” report form the finance minister to parliament on the financial sector’s competitive position.
“Continuing to evolve the UK listings regime is key to providing flexibility for companies who want to list in London while maintaining high standards of corporate governance,” said David Schwimmer, chief executive of the LSE Group.
(Reporting by Huw Jones; editing by David Evans)
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