A new social network based approach shows improvements in trading performance. Although retail trading is more popular than ever and the numbers of both trades and profits are on the rise, institutional investors still rule the field when it comes to long term gains.
Why the gap?
Access to information seems to make the biggest difference. The institutional trader is privy to faster incoming information that is shared in larger volumes across financial firms. Your average Wall Street trader is constantly connected to Reuters and Bloomberg where economic events are updated every 2 milliseconds. Firms like Goldman Sachs employ hundreds of staff members to analyze the market on a daily basis and spread the information within the company.
Unlike the corporate investor, the retail investor faces a lot more challenges on his quest for information. Despite the huge volumes of data and analysis that are available online, retail investors find it difficult to select trustworthy sources, and sift through the ocean of available information to find what is relevant to them.Moreover, when it comes to choosing a theoretical model on which to base fundamental analysis, it takes specialized knowledge to determine which one to use out of the dozens of models out there.
For example, institutional investors monitor interest rates very closely because they have the most immediate impact on currency prices, and yet most retail investors are unaware of its importance, or even its existence in some cases.
Wisdom in Numbers
Social trading adds a new dimension to currency trading. By allowing retail investors to share their information and expertise, it bridges the traditional informational gap between retail and institutional traders. It also offers unprecedented transparency regarding how their money is invested by providing real time data feeds of trading activity and access to experts with whom to discuss investment strategies.
A large active investment network contains a wealth of financial information that is shared by its members who come from all over the globe and from all walks of life. This rich diversity of investors creates an enormous data base of investment advice that is automatically sifted through the various social ties between the members.
Traders have been quick to recognize the benefits of such a large and diverse knowledge base and as a result social networks are growing quickly and teeming with ever increasing activity.
Many believe that the recent popularity of social networking has already lead to bigger trading volumes. The online research firm Data monitor reports that over 50% of consumers today are making their financial decisions using online financial tools.
Since the launch of our social trading network, over 60% of our customers(eToro) take the opportunity to consult with expert traders and follow their trading activity, proving that social trading networks are changing the way people trade by enabling communal sharing and collaboration online.
It’s this collective wisdom that provides traders of all levels of expertise with valuable information that in turn allows them to trade smarter together.
How does it work?
The great thing about healthy and active social networks is that they are self-regulating, which means that exceptional traders will automatically rise to the surface. Social networks make it easy to identify traders with high success rates and overall gains, and sort them according to various factors such as the instruments they trade, or the risk they take. Once a potential expert has been identified, traders have access to detailed trading statistics with charts and graphs that enable them to analyze individual performance in much the same way that one analyzes the prospectus for any kind of potential business investment.
In addition, the social network adds a dimension of social indicators which can be used to determine if a trade is advantageous to follow according to their number of followers and the number of people actively copying their trades. Factors such as a trader’s degree of interaction and responsiveness within their circle of followers give a further glimpse into a trader’s personality, performance and trading style.
Social trading has the power to transform financial investment into the creation of people-based portfolios by enabling traders to copy each other and to divide their investment capital among several traders. This portfolio lowers the trader’s overall risk and is very easily manageable according to performance.
Bridging the Gap
Recent analysis of financial investments online shows irrefutable evidence that following copying expert traders has a positive effect on trading performance. This evidence arises from a comparison study of the success rates of trades that were executed in the framework of social trading activity as compared with overall trading performance.
In this study we compared two factors: the win ratio, which is the percentage of profitable trades from the total amount of trades, and the average profit per trade. This comparison revealed that copied trades had higher success rates and higher average profit or lower loss per trade.
In the first months following the launch of the Copy Trade and Copy Trader™features on eToro Open Book, we saw an improvement of 8%-12% in the win ratio of all copied trades.
Along with this figure, we also saw a huge improvement that reached hundreds of percentage points in the profits of traders using Open Book’s copy trading functions.
Based on these findings, we predict that as the momentum of social trading grows and appropriates a bigger percentage of the financial investment pie, the gap between retail and institutional trading will continue to close. Some our guru traders have built a following of several thousand traders within only a few months since the launch of our social network, and the numbers keep growing. As gurus gain more experience and a amass a larger following, their trading activity will have an even bigger impact on the retail market,lifting overall retail performance to the level of institutional investors.
Social trading’s biggest advantage is that any successful investment is not only reflected in the investor’s balance, but is also documented and shared among others, enabling them to reap educational and fiscal benefits from the original investor’s trading strategies and techniques. The accelerated learning curve raises the overall trading performance in the social network as the effects of one trader’s improvements quickly trickle down to its weakest members. Thus, as an entity, the social trading network has the potential to raise the bar indefinitely and to add stability to any retail investor’s portfolio.
For further information visit : www.etoro.com
UK might need negative rates if recovery disappoints – BoE’s Vlieghe
By David Milliken and William Schomberg
LONDON (Reuters) – The Bank of England might need to cut interest rates below zero later this year or in 2022 if a recovery in the economy disappoints, especially if there is persistent unemployment, policymaker Gertjan Vlieghe said on Friday.
Vlieghe said he thought the likeliest scenario was that the economy would recover strongly as forecast by the central bank earlier this month, meaning a further loosening of monetary policy would not be needed.
Data published on Friday suggested the economy had stabilised after a new COVID-19 lockdown hit retailers last month, while businesses and consumers are hopeful a fast vaccination campaign will spur a recovery.
Vlieghe said in a speech published by the BoE that there was a risk of lasting job market weakness hurting wages and prices.
“In such a scenario, I judge more monetary stimulus would be appropriate, and I would favour a negative Bank Rate as the tool to implement the stimulus,” he said.
“The time to implement it would be whenever the data, or the balance of risks around it, suggest that the recovery is falling short of fully eliminating economic slack, which might be later this year or into next year,” he added.
Vlieghe’s comments are similar to those of fellow policymaker Michael Saunders, who said on Thursday negative rates could be the BoE’s best tool in future.
Earlier this month the BoE gave British financial institutions six months to get ready for the possible introduction of negative interest rates, though it stressed that no decision had been taken on whether to implement them.
Investors saw the move as reducing the likelihood of the BoE following other central banks and adopting negative rates.
Some senior BoE policymakers, such as Deputy Governor Dave Ramsden, believe that adding to the central bank’s 875 billion pounds ($1.22 trillion) of government bond purchases remains the best way of boosting the economy if needed.
Vlieghe underscored the scale of the hit to Britain’s economy and said it was clear the country was not experiencing a V-shaped recovery, adding it was more like “something between a swoosh-shaped recovery and a W-shaped recovery.”
“I want to emphasise how far we still have to travel in this recovery,” he said, adding that it was “highly uncertain” how much of the pent-up savings amassed by households during the lockdowns would be spent.
By contrast, last week the BoE’s chief economist, Andy Haldane, likened the economy to a “coiled spring.”
Vlieghe also warned against raising interest rates if the economy appeared to be outperforming expectations.
“It is perfectly possible that we have a short period of pent up demand, after which demand eases back again,” he said.
Higher interest rates were unlikely to be appropriate until 2023 or 2024, he said.
($1 = 0.7146 pounds)
(Reporting by David Milliken; Editing by William Schomberg)
UK economy shows signs of stabilisation after new lockdown hit
By William Schomberg and David Milliken
LONDON (Reuters) – Britain’s economy has stabilised after a new COVID-19 lockdown last month hit retailers, and business and consumers are hopeful the vaccination campaign will spur a recovery, data showed on Friday.
The IHS Markit/CIPS flash composite Purchasing Managers’ Index, a survey of businesses, suggested the economy was barely shrinking in the first half of February as companies adjusted to the latest restrictions.
A separate survey of households showed consumers at their most confident since the pandemic began.
Britain’s economy had its biggest slump in 300 years in 2020, when it contracted by 10%, and will shrink by 4% in the first three months of 2021, the Bank of England predicts.
The central bank expects a strong subsequent recovery because of the COVID-19 vaccination programme – though policymaker Gertjan Vlieghe said in a speech on Friday that the BoE could need to cut interest rates below zero later this year if unemployment stayed high.
Prime Minister Boris Johnson is due on Monday to announce the next steps in England’s lockdown but has said any easing of restrictions will be gradual.
Official data for January underscored the impact of the latest lockdown on retailers.
Retail sales volumes slumped by 8.2% from December, a much bigger fall than the 2.5% decrease forecast in a Reuters poll of economists, and the second largest on record.
“The only good thing about the current lockdown is that it’s no way near as bad for the economy as the first one,” Paul Dales, an economist at Capital Economics, said.
The smaller fall in retail sales than last April’s 18% plunge reflected growth in online shopping.
BORROWING SURGE SLOWED IN JANUARY
There was some better news for finance minister Rishi Sunak as he prepares to announce Britain’s next annual budget on March 3.
Though public sector borrowing of 8.8 billion pounds ($12.3 billion) was the first January deficit in a decade, it was much less than the 24.5 billion pounds forecast in a Reuters poll.
That took borrowing since the start of the financial year in April to 270.6 billion pounds, reflecting a surge in spending and tax cuts ordered by Sunak.
The figure does not count losses on government-backed loans which could add 30 billion pounds to the shortfall this year, but the deficit is likely to be smaller than official forecasts, the Institute for Fiscal Studies think tank said.
Sunak is expected to extend a costly wage subsidy programme, at least for the hardest-hit sectors, but he said the time for a reckoning would come.
“It’s right that once our economy begins to recover, we should look to return the public finances to a more sustainable footing and I’ll always be honest with the British people about how we will do this,” he said.
Some economists expect higher taxes sooner rather than later.
“Big tax rises eventually will have to be announced, with 2022 likely to be the worst year, so that they will be far from voters’ minds by the time of the next general election in May 2024,” Samuel Tombs, at Pantheon Macroeconomics, said.
Public debt rose to 2.115 trillion pounds, or 97.9% of gross domestic product – a percentage not seen since the early 1960s.
The PMI survey and a separate measure of manufacturing from the Confederation of British Industry, showing factory orders suffering the smallest hit in a year, gave Sunak some cause for optimism.
IHS Markit’s chief business economist, Chris Williamson, said the improvement in business expectations suggested the economy was “poised for recovery.”
However the PMI survey showed factory output in February grew at its slowest rate in nine months. Many firms reported extra costs and disruption to supply chains from new post-Brexit barriers to trade with the European Union since Jan. 1.
Vlieghe warned against over-interpreting any early signs of growth. “It is perfectly possible that we have a short period of pent up demand, after which demand eases back again,” he said.
“We are experiencing something between a swoosh-shaped recovery and a W-shaped recovery. We are clearly not experiencing a V-shaped recovery.”
($1 = 0.7160 pounds)
(Editing by Angus MacSwan and Timothy Heritage)
Oil extends losses as Texas prepares to ramp up output
By Devika Krishna Kumar
NEW YORK (Reuters) – Oil prices fell for a second day on Friday, retreating further from recent highs as Texas energy companies began preparations to restart oil and gas fields shuttered by freezing weather.
Brent crude futures were down 33 cents, or 0.5%, at $63.60 a barrel by 11:06 a.m. (1606 GMT) U.S. West Texas Intermediate (WTI) crude futures fell 60 cents, or 1%, to $59.92.
This week, both benchmarks had climbed to the highest in more than a year.
“Price pullback thus far appears corrective and is slight within the context of this month’s major upside price acceleration,” said Jim Ritterbusch, president of Ritterbusch and Associates.
Unusually cold weather in Texas and the Plains states curtailed up to 4 million barrels per day (bpd) of crude production and 21 billion cubic feet of natural gas, analysts estimated.
Texas refiners halted about a fifth of the nation’s oil processing amid power outages and severe cold.
Companies were expected to prepare for production restarts on Friday as electric power and water services slowly resume, sources said.
“While much of the selling relates to a gradual resumption of power in the Gulf coast region ahead of a significant temperature warmup, the magnitude of this week’s loss of supply may require further discounting given much uncertainty regarding the extent and possible duration of lost output,” Ritterbusch said.
Oil fell despite a surprise drop in U.S. crude stockpiles in the week to Feb. 12, before the big freeze. Inventories fell by 7.3 million barrels to 461.8 million barrels, their lowest since March, the Energy Information Administration reported on Thursday. [EIA/S]
The United States on Thursday said it was ready to talk to Iran about returning to a 2015 agreement that aimed to prevent Tehran from acquiring nuclear weapons. Still, analysts did not expect near-term reversal of sanctions on Iran that were imposed by the previous U.S. administration.
“This breakthrough increases the probability that we may see Iran returning to the oil market soon, although there is much to be discussed and a new deal will not be a carbon-copy of the 2015 nuclear deal,” said StoneX analyst Kevin Solomon.
(Additional reporting by Ahmad Ghaddar in London and Roslan Khasawneh in Singapore and Sonali Paul in Melbourne; Editing by Jason Neely, David Goodman and David Gregorio)
UK might need negative rates if recovery disappoints – BoE’s Vlieghe
By David Milliken and William Schomberg LONDON (Reuters) – The Bank of England might need to cut interest rates below...
UK economy shows signs of stabilisation after new lockdown hit
By William Schomberg and David Milliken LONDON (Reuters) – Britain’s economy has stabilised after a new COVID-19 lockdown last month...
Dollar extends decline as risk appetite favors equities
By Stephen Culp NEW YORK (Reuters) – The dollar lost ground on Friday, extending Thursday’s decline as improved risk appetite...
Bitcoin hits $1 trillion market cap, soars to another record high
By Gertrude Chavez-Dreyfuss and Tom Wilson NEW YORK/LONDON (Reuters) – Bitcoin touched a market capitalization of $1 trillion as it...
Shares rise as cyclical stocks provide support; yields climb
By Saqib Iqbal Ahmed NEW YORK (Reuters) – A gauge of global equity markets snapped a 3-day losing streak to...
Battling Covid collateral damage, Renault says 2021 will be volatile
By Gilles Guillaume PARIS (Reuters) – Renault said on Friday it is still fighting the lingering effects of the COVID-19...
Portable Oxygen Concentrators Market to Register 7.8% CAGR Through 2026; Sales to Surge as Oxygen Therapy Becomes Crucial in Covid-19 Treatments
Portable oxygen concentrator manufacturers are largely concerned with the maintenance of inventories throughout the coronavirus crisis, with optimization of supply...
Cancer Supportive Care Products Market to Reach US$ 32 Bn by 2030; Sales Limited by Complications for Cancer Patients Through Covid-19 Infections
The cancer supportive care products market is anticipated to reach a valuation of US$ 32 billion by 2030. The industry is expected...
Bronchoscopes Sales to Rise 1.5x Between 2018 and 2028; Potential Covid-19 Diagnostic Applications to Generate Lucrative Growth Opportunities
Bronchoscope manufacturers remain focused on development initiatives to improve product functionality and accuracy for higher adoption amid healthcare facilities. The bronchoscopes...
US$ 1.1 Bn Hypoparathyroidism Treatment Market Still in Infancy
Mushrooming incidences of thyroid cancer have amplified the number of thoracic surgeries, thus stimulating growth of hypoparathyroidism treatment market. Future...