Investment Insights

A recent report into algorithmic trading by the Hong Kong Academy of Finance has cast an interesting light on this dark art. To put this into perspective, algorithmic trading accounted for:-

Over the last few years, we have seen the emergence of a new trend which is somewhere between execution-only anddiscretionary management, at least in the eyes of many investors. This new trend is commonly referred to as copy trading or mirror trading. As the term suggests, it is the simple process of copying the transactions of a particular individual or company. However, it becomes a bit more complicated once we begin to dig a little deeper.

In simple terms, clearing services relate to the process of reconciling purchases and sales across a range of different investment assets. Ultimately, this will lead to the exchange of funds and stock to settle a transaction. It all sounds straightforward in theory, but in practice, it can be a little more complex. However, the modern-day system is highly flexible!

While obviously, we can’t see into the future, we do have sufficient data from the past to be able to backtest strategies and trading ideas. While not the most glamorous of activities, it allows you to hone your trade execution only skills, ready for the next trading opportunity. So, what are the specific benefits of backtesting?

While we take the FTSE 100, Dow Jones Industrial Average and the NASDAQ for granted, you may be surprised at the history of stock market indices. Used as a way to reflect the underlying economy and performance, they have been a helpful indicator of future economic trends. Consequently, they have proved to be priceless to investors, comparing and contrasting the performance of stocks and indices.

Whether you are just starting your investment journey or perhaps looking at execution-only services in different markets, there will be a virtual trading site to suit your needs. These virtual trading sites are now more complex than their historic counterparts, offering trade execution using real-time prices. However, does virtual trading prepare you for real trading?

While we often hear the term “professional trader”, what differentiates a professional trader from a trader? Is it the level of funding available? Strategy, targets and time spent trading? Is professional trading a career?

Many people will be aware of the LCH, and the services provided but are unlikely to know it has a history dating back to 1888. The company is now 82.61% owned by the London Stock Exchange Group and one of the largest clearinghouses in the world, offering clearing services across the globe.

While there are many economic and sentiment indicators in the modern world, the so-called “Misery Index” is a helpful indicator. Using the combined rate of inflation and unemployment, the index is used to measure people’s misery. Even though this sounds a little far-fetched, it is essential to look at the components. How they interact and how the index has fared in the past.

Life as a short-term/day trader has its ups and downs, but there are always opportunities to trade. It is how you react during the more difficult times that will make or break your career. As times get more challenging, it is easy to over-analyse your next investment. We know that 90% of traders will fail in the first few years due to various issues such as fear, greed and over-analysing relatively simple situations.