The stock market is a massive platform and analysts keep speculating and offering different techniques for an investor to gain the momentum and earn profits during their investment journey. The Swing Trading technique is one such activity wherein the various investment instruments/ vehicles such as, stocks, bonds, indices, currencies or commodities are repeatedly bought or sold depending upon the price volatility the market is experiencing.
In Swing Trading technique the investment is of a short-term, but the duration may vary from 3-4 days to as long as 3-4 weeks. The reason behind the inception of this technique is to lend a helping hand to investors who lack confidence to take risks and also the investors who find it difficult to do the market analysis and observe their investments on a daily basis for a long term.
As this technique is devised to earn profits within a short duration, the investors are advised to invest in more than one stock, especially the ones listed with exchanges like NYSE, NASDAQ and AMEX etc. Out of the innumerable stock exchanges, experts rely on these 3 exchanges more than any one as they have better chances of acquiring profits within a short span of time.
Another factor which makes Swing Trading activity an interesting phenomenon is that it can function in a stagnant market which does not display a complete bullish or bearish behaviour. So more the market is stagnant, the better performance will be projected (especially during short-term investment) and thus better returns.
Another characteristic feature of this technique is that it takes advantages from the periodical fluctuations in the stock market when the investment with long-term investment strategy will remain silent.
Investors prefer Swing Trading over other trading techniques because:
- The risk quotient is low.
- Encourages short-term investment.
- Encourages novice and part-time traders.
What options to choose in Swing Trading?
- It is advised that the investor should pick up stocks from large companies (also known as Large-cap Stocks) as these stocks experience greater fluctuations.
- The Swing trading is best suited for a market which is stable rather than a bullish or bearish market (which is unidirectional). In a stable market, the stocks prices would experience a sudden rise (on one day) and a sudden fall (on the other) and this pattern gives strength to Swing trading.
Capital Markets: The Last Frontier for Digital Transformation in Financial Services
By Dr. Avtar Singh Sehra, CEO, Nivaura
The last decade has seen financial services undergo vast digital transformation. New technologies and a greater ability to digitise and automate processes have brought greater efficiency and effectiveness to the sector, as well as enabling the creation of new, value-added consumer and B2B products.
Capital markets, however, remain largely unchanged. The industry is constrained by legacy processes that often involve substantial manual data input and document/spreadsheet management, which is inefficient in comparison to digital and automated operations. These inefficiencies have been squeezing capital market participants’ margins for far too long.
The current state of affairs
As it stands, a typical primary capital markets execution is a linear and sequential process involving multiple stakeholders, who repeatedly convey information back and forth manually to draft and execute legal documents, and then manage data input into multiple systems. This data is then sent across multiple institutions across the transaction lifecycle from pre-trade to post-trade, where it is again extracted and transformed to perform further lifecycle management activities. The processes that occur after drafting relevant documentation, such as clearing and record-keeping, are also manual and time consuming, with parties having to review documents individually.
There are some exceptions to this. For example, within commercial paper and certificates of deposit, there is some level of automation in how deals are executed, and data is transmitted from a dealer into post trade processes. In addition, high volume, structured, self-led transactions may be standardised to some degree. However, even with these isolated islands of partial automation, the general debt capital markets (DCM) issuance process remains highly manual and is in desperate need of digitisation and automation to increase its effectiveness and efficiency.
Not only do these repeated manual processes require significant human resources, but they are also prone to error. Humans, for all our gifts compared to machines, will never be able to achieve consistent 100% accuracy when it comes to complex data and document management processes. However, before we can even begin to discuss automating manual activities, they must first be digitised. This is crucial because it enables the capture of structured data throughout the transaction lifecycle. Only structured data can be easily leveraged for advanced automation, from simple if-then logic, to advanced machine learning technologies for complex cognitive decision making e.g., extracting data from complex documents.
Considering the evolution that the rest of the financial sector has undergone over the last twenty years when it comes to digitisation and automation, it’s hard to understand why capital markets have been left behind until now. But change is finally coming.
A turning point
2020 saw the winds of change begin to blow across the capital markets industry. In a first for the sector, a group representing all participants of primary capital market transactions is collaborating on a data standard to be used in legal documents as well as down-stream systems and transactions data flow: General-purpose Legal Mark-up Language (GLML). This collaboration is taking place under the umbrella of the GLML Consortium, whose founding members include magic circle law firms and capital markets infrastructure technology vendors.
GLML is a ‘mark-up language’: a type of human and machine-readable syntax developed to be easy for a lawyer (or, indeed, anyone else) to implement in documentation with little training, and without requiring coding experience. It enables users to easily turn their existing contractual templates, including precedents and pro formas, into machine readable files, which can then be used to create transactions with structured data from the outset that can map to a standardized taxonomy for transmission across the pre- or post-trade process. Any word processor or editor (including Microsoft Word) can be used to apply GLML, allowing drafters to create and maintain “GLML’d” templates in the same way they approach traditional documentation.
Fundamentally, GLML permits the accurate extraction of key data from legal documentation, allowing it to be passed to relevant intermediaries in a standard and automated and seamless manner.
The wider implications of GLML
At first glance, it’s easy to underestimate the impact that a standard like GLML could have on the capital markets industry, but enormous benefits come from what it will enable.
First, GLML enables the accurate creation of structured data, which is usually produced and executed in an unstructured way in debt capital markets transactions. GLML therefore allows data to be passed between relevant transaction participants and financial market infrastructures automatically and seamlessly, and thus easily mapped to other formats. This alone will make capital markets workflows much more efficient, increasing profit margins and freeing up human resources to focus on value-add tasks and projects. Furthermore, as the volume of structured data increases, we gain further capabilities to enable increasing automation using AI tools.
Second, GLML enables capital markets participants, from dealers and borrowers to lawyers, to communicate easily, and collaborate throughout the capital raising process on digital platforms. This again reduces human error caused by data input, extraction and transformation.
Third, but perhaps most importantly, is that GLML as an open standard drives expansion of the ecosystem and enables innovation. For example, if one were to invest in digitising and automating all their capital markets documents through “low-code” or “no-code” tools, they would be locked into one vendor’s tools and standards. This means that, as the industry changes and new services emerge, or if you simply want to convert generated data to other formats, significant further effort is required. This slows down adoption of such tools and makes communication and interactions between multiple parties more challenging.
It is accepted that a lack of standards creates friction in a market, which limits interaction, flexibility, agility and innovation. One of the most obvious examples of this is seen in the emergence of the World Wide Web, which is underpinned by HTTP/HTML and led to the explosive adoption of the internet in the 90s. We can even go further back than this, where the lack of “standard”, or, more accurately, lack of a common railway gauge (rail width), led to significant challenges in the early railways. When a line of one gauge met a line of a different gauge, trains couldn’t run through without some form of conversion, which would normally lead to passengers having to change trains. This resulted in significant delays, inconvenience and cost. Widespread adoption of railways globally did not come until a standard gauge was created.
GLML will achieve for capital markets what HTTP did for the internet. It will support the simplification and ultimately democratisation of capital markets, ensuring the demand for capital can be efficiently and effectively connected to the supply.
GLML, as an open data standard, is the first step to digitising and automating the lifecycle of the issuance process. Today, capital markets processes are outdated, leading to vast and unnecessary cost and risk. Evolution is both essential and inevitable and, driven by GLML, 2021 will be the year that the debt capital markets transform for good as the industry converges around a common standard.
Gold-i Integrates with CryptoCortex
Gold-i has integrated with CryptoCortex – an advanced digital asset trading platform from EPAM Systems, a leading global provider of digital platform engineering and development services. This provides financial institutions with increased access to multiple market makers and fully cleared cryptocurrency products available via Gold-i’s CryptoSwitch 2.0™, part of its Matrix multi-asset liquidity management platform.
The integration was completed following a request from a Gold-i client wanting to use the CryptoCortex platform to access liquidity from Hehmeyer and Shift Markets via Gold-i’s CryptoSwitch 2.0™.
Tom Higgins, CEO, Gold-i comments, “As digital asset trading continues to gain momentum amongst brokers, Prime of Primes and hedge funds, a key part of our strategy is to ensure that the cryptocurrency liquidity available through Gold-i’s liquidity management platform is easily accessible, regardless of which trading platform clients are using. CryptoCortex is one of the most advanced platforms for digital asset trading, therefore integrating with them was a logical step for Gold-i.”
“We are delighted to partner with Gold-i to provide our customers with real-time, event-driven processing and analytics that not only meets their essential needs but also delivers actionable intelligence,” said Ilya Gorelik, VP, Real-Time Computing Lab at EPAM. “Financial markets are among the fastest moving markets around, and with cutting edge tools – like CryptoCortex – that make data readily available, customers can quickly implement the best decisions possible.”
CryptoCortex is the most advanced institutional cryptocurrency trading platform on the market, providing a complete 360-degree solution for brokers/dealers, exchanges and buy-side trading firms. It has been developed by Deltix (now EPAM Systems), based on over 10 years’ experience in building, deploying and supporting institutional-grade intelligent trading across equities, futures, options, forex and fixed income.
Gold-i Matrix offers multiple routing and aggregation methods, leveraging connections with over 70 Liquidity Providers. It is super-fast and highly flexible, helping financial institutions worldwide to make more money and reduce risk. It supports FX, CFDs and cryptocurrencies in a single solution which is fully compatible with the Gold-i Crypto Switch. Crypto Switch™ 2.0, provides brokers worldwide with a fully cleared cryptocurrency product and a cost-effective, efficient means of accessing multiple cryptocurrency market makers who can provide deep pools of liquidity as a CFD or physical asset. For further information, visit www.gold-i.com.
5 Questions to Ask Yourself Before Trading Penny Stocks
Anyone and everyone from all corners of the world can trade from their comfort of their own as all that is needed is a computer and an internet connection.
Many people chose to trade complex asset classes like crude oil futures. But penny stock trading is preferred to many new traders because it is a lot easier to understand the stock market than the global oil market. Trading penny stocks is also cheaper to get started as some brokers have no minimum deposit requirement.
So how do you know if trading penny stocks is right for you? Here are five questions you need to ask yourself first.
1. Do You Have the Right Financial Motives?
Why exactly do you want to trade? If you want to trade to become a millionaire within a year or two despite little or no experience, trading most certainly is not right for you. Trading stocks involves risk but penny stocks could be even riskier.
Ask yourself if the money you want to risk trading penny stocks is needed for important expenses. Trading with rent money or your children’s education fund with the hopes of doubling is not the right mindset to have.
And forget about sustaining yourself with a guaranteed income at any point in your trading career. There is no magical number but you need enough money to cover at least six months’ worth of expenses while learning how to day trade.
But do you have a backup plan if your money runs out faster than expected? Can you call it quits earlier than expected and return to a regular job?
The appropriate and responsible path is to take a few months to learn how to properly and responsibly trade penny stocks. Learning the true ins and outs of penny stock trading strategies can unlock the potential for explosive returns.
2. Do You Have the Right Schedule?
Trading penny stocks for many people is a full-time job. But some people can get away with trading penny stocks as a hobby if they are available at only certain times of the day.
It is absolutely vital for penny stock traders to be alert and at their trading station at least an hour before the stock market opens. During the pre-market session, a trader is scanning the large universe of penny stocks to evaluate what stocks they will be buying and selling.
They might be looking at the news for a biotechnology company that released results from an encouraging clinical study trial. Or, they are looking for a company that announced a major contract win that would double or triple their sales.
So once 9:30 AM ET hits and the trading session official starts, a trader is well prepared.
But someone who is only available to trade penny stocks as of say 9:15 AM may not have enough time to prepare themselves for the fast action.
Similarly, traders that start their day in the afternoon session will miss out on many of the early movers and there is simply less opportunity from 12:00 PM to around 3:30 PM.
Part-time traders that start early enough can get away with ending their trading session before noon.
If you don’t have the right schedule due to work schedule, family obligations or you are in a different time zone, then penny stock trading during the off-hours might be a tedious task that offers little reward.
Source: Google Finance. (Ticker $MREO, daily chart from Dec. 18): This shows how early traders were able to capitalize on the strong gains and late traders missed out on a major surge.
3. Are You Motivated to Learn?
The day trading universe is open to anyone that wants to open an account and deposit money and no prior experience or knowledge is required.
But ask yourself first what do you really know about the stock market universe and how much are you willing to learn. Do you know how to read and understand Level 2 charts? Do you know the importance of SEC disclosures? What about evaluating what impact a poor earnings release will have on a stock’s movement.
It is OK not to know the answer to these dozens of other similar questions. But do you have the drive and dedication to learn from scratch? Do you have what it takes to read books and watch educational videos for weeks at a time? While this could be seen as an exciting process and an opportunity to learn a new skill, a lot of hard work and dedication is required to succeed.
4. Do You Know the Difference Between Trading And Gambling?
The general public shouldn’t be faulted for correlating trading penny stocks with gambling. They may have seen headlines about how the global COVID-19 pandemic prompted many bored sports bettors to find excitement and action in stocks.
But there is a fine line between trading penny stocks and gambling. Do you know the difference between the two? Gamblers will pick a penny stock — any penny stock and buy shares and simply hope for the best. They have no knowledge of what the company does, nor do they really care. They either make money on a trade or don’t.
Penny stock traders on the other hand have a strategy that has been developed, revised, and improved on over months if not years. They know how technical analysis can be used to determine an entry point, how to analyze volume trends, and where to get their news and information.
Perhaps more important, they know how vital it is to have an exit strategy as part of every trade and then to just move on.
Gamblers on the other hand love to double down when they are losing. If you are a gambler that is fine. Just be aware that the individual on the other side of your trade knows way more than you do about stocks and will be happy to take your money.
Which one are you? If you are a trader and know how to be disciplined and cautious then trading might be right for you.
Conclusion: Be Honest with Yourself
Trading penny stocks involves risk and many new traders fail. Checking off a bunch of answers from a checklist is useless and meaningless unless you are honest.
At the end of the day, only you can determine if trading penny stocks is truly the best move for you professionally. A broker certainly won’t be asking you these questions. It is not their responsibility to do so.
So be honest with yourself. If you really want to trade penny stocks but recognize now isn’t the ideal time for financial reasons or you have the wrong mindset there is nothing preventing you from giving it a shot in six months or a year.
This is a contributed article
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