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Mistakes that rookie traders make

(BLOOMBERG) Ms Lena Birse is a stay-at-home mum who loves buying tech stocks during market crashes. Mr Jay Smith is a former professional gamer who switched from crypto-currencies to blue chips. Ms Heloise Greeff is a data scientist who uses machine learning to analyse trading patterns.

(BLOOMBERG) Ms Lena Birse is a stay-at-home mum who loves buying tech stocks during market crashes.

Mr Jay Smith is a former professional gamer who switched from crypto-currencies to blue chips.

Ms Heloise Greeff is a data scientist who uses machine learning to analyse trading patterns.

And Mr Mik Mullins is a retired hotel executive who is betting the market is about to plunge.

These four amateur traders use different approaches but have one thing in common: They are killing it in one of the wildest markets in memory, with returns ranging from 20 per cent to 60 per cent this year.

Playing the market is fraught with risks, of course, and stories abound of newcomers making rookie mistakes.

To learn how to avoid pitfalls, Bloomberg News picked the brains of these four top performers on eToro, a digital trading platform with 14 million users that is regulated by Britain’s Financial Conduct Authority.

EToro lets people copy the trades of investors with proven track records, like this quartet.

They all believe newcomers make mistakes by not investing for the long term and for failing to diversify their portfolios with at least 30 well-researched names.

Here are the other things they see people doing wrong, based on their experience:

JUMPING IN WITHOUT TESTING OUT TRADING STRATEGIES

Ms Greeff, 30, a research fellow in machine learning at Oxford University, used a “demo account” on eToro to execute simulated trades with US$100,000 (S$136,000) of fake money.

She discovered straight away that trying to time the market and trade in and out of positions every day was a bad idea.

When the S&P 500 Index and other benchmarks were hitting all-time highs late last year, the data was sending her a powerful signal: It was time to retreat.

“I am a conservative trader so I liquidated 60 per cent of the positions in my portfolio, and while I missed the highs of January, I had peace of mind,” she says.

Since then, she has waded back in, and two of the biggest holdings in her 60-stock portfolio are Mastercard and IBM.

She is up around 20 per cent this year.

CHASING HYPED STOCKS INSTEAD OF DOING RESEARCH

When the digital coin bubble popped in 2018, Mr Smith’s portfolio fell almost 54 per cent and he learnt a painful lesson on hype.

These days, the 32-year-old’s bets are a far less racy mix: Chipmaker AMD and Microsoft are long-time favourites, and this year he started buying shares in Home Depot and Lowe’s, the home improvement giants.

He feels comfortable with such tactics because he does his homework. “I spend a large amount of time reading product user manuals and watching launch events on YouTube.

“A solar company I follow recently held a training day online, so I watched to see how they install their equipment.” He is up about 50 per cent this year.

INVESTING MONEY YOU NEED IN FIVE YEARS

Mr Mullins advised friends to follow one primary rule: Never invest money that you are going to need for big-ticket items such as a house or college tuition. He is a true believer in investing for the long term. He does not even like to look at his portfolio more than once a week.

He is up almost 29 per cent for the year, thanks to his long positions.

GETTING YOURSELF INTO COMPLEX TRADES BEFORE YOU’RE READY

It has never been easier for retail investors to use leverage, options and short-selling, but amateurs should avoid complicated tactics until they understand how they can backfire, say both Mr Mullins and Mr Smith.

The rush of newbie traders into flashy equity-trading apps have already led to some grim consequences.

In June, Robinhood pledged to change elements of its options trading platform after the suicide of a 20-year-old user who had an account that showed a negative balance of more than US$700,000.

The company’s co-founders said they would consider additional eligibility requirements for users who wanted to tap more advanced options strategies.

OBSESSIVELY CHECKING YOUR PORTFOLIO

It can be tempting to keep looking at the daily swings in your stocks’ prices, but if you do this every day, it spurs panicky trades and losses.

Over time, Ms Birse said, she built a tolerance for risk. After the pandemic hit, she resisted the urge to panic. Instead, she bided her time and prepared to add to her positions in long-time “winners” such as Shopify, the Canadian e-commerce firm that has skyrocketed 148 per cent this year.

“I used to turn off the computer during sell-offs. But then I wanted to be more active, more aggressive, so in March, I steeled my nerves, waited three weeks, and then it was time to go shopping. It felt like the sale of the century.” Her portfolio is up 61 per cent. 

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Industry News

School4Trading Review – How to Spot Possible Forex Broker Fraud

School4trading Review

School4Trading Review – How to Spot Possible Forex Broker Fraud

In this School4trading Review, we will look at the features of the software, as well as the customer support. First, let us look at the interface. The design is simple and easy to navigate. It also provides a chatbot, which helps you to communicate with the broker. The customer service is warm and inviting, which is a hallmark of a good broker. In contrast, a fraudulent broker will use cold and impersonal customer support to lure people in.

Another problem with the system is that the login process is not always intuitive. You may have to retype your password several times to get in. Then, you may experience difficulties withdrawing your funds or accessing your account. In such cases, you might have to wait for days or even weeks before you can withdraw the money you’ve invested. This is not a good sign. It’s better to choose a different trading platform altogether.

If you’re having trouble logging in, you should also check the legitimacy of the broker. Whether the broker is licensed by a reliable regulatory body or closed down, you’ll want to be sure it’s legitimate. If the broker isn’t licensed by the right body, don’t trust him. You shouldn’t waste your time with an inexperienced company. This will only cause you problems in the long run.

The next factor that should be checked is the licensing. A legitimate broker will have a license from a high regulatory body. However, a broker without a license will be unreliable. Moreover, a reliable regulator will take away the license of a scam broker. As a result, a trustworthy School4Broker/Profittrade review should mention fees, account rules, and contract terms. A scam broker will be unable to operate legally.

Secondly, look for warning signs. The broker should be licensed and regulated by a reliable regulatory body. It should be regulated by a high level. If it doesn’t, it’s a scam. Lastly, it should have a website that lets you easily access your account. Moreover, you should not hesitate to check the contact information. If you find any information that seems suspicious, you should reconsider using the broker.

In summary, Forex trading isn’t easy, but it doesn’t have to be complicated. It’s not as difficult as it seems if you’ve heard about the program. You’ll learn everything about the basics and how to become a professional. But if you’re still unsure about whether this program is right for you, don’t hesitate to contact a school4trading’s website.

The most important thing to remember when it comes to Forex trading is that it’s not easy. While it’s important to have a strong background in trading, there are a number of factors that can affect your success. Having a proper plan is vital in the long run, because you will be trading with real money. And, the platform should be reliable. Otherwise, you’ll end up losing a lot of money.

As we’ve mentioned, Forex is not easy. Investing isn’t something you can do in the comfort of your own home. You need a proven system. There are no free trials, so you’ll have to find a way to do it yourself. This isn’t a scam, and it’s a great way to make money without any help. A Forex system can help you learn the intricacies of the market.

Although the process of learning Forex isn’t an easy one, it’s certainly not impossible. Fortunately, there are many people who are willing to take the time to learn how to trade. But, even the most experienced trader needs to be aware of the risks of the market. While Forex trading isn’t easy, it can be done with the right knowledge. The software’s user-friendly interface is key.

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Daily Financial News

Don’t Count On JPY Correction; Staying Long GBP/JPY

The path of the potential pace of the JPY decline may still be underestimated by markets, which continue trading the JPY long.

While the 10% USDJPY advance from September lows looks impressive from a momentum point of view, it may no thave been driven by Japan’s institutional investors reducing their hedging ratios or Japan’s household sector reestablishing carry trades.

Instead, investors seemed to have been caught on the wrong foot, concerned about a sudden decline of risk appetite or the incoming US administration being focused on trade issues and not on spending. Spending requires funding and indeed the President-elect Trump’s team appears to be focused on funding. Here are a few examples: Reducing corporate taxation may pave the way for US corporates repatriating some of their USD2.6trn accumulated foreign profits. Cutting bank regulation could increase the risk-absorbing capacity within bank balance sheets. Hence, funding conditions – including for the sovereign – might generally ease. De-regulating the oil sector would help the trade balance, slowing the anticipated increase in the US current account deficit. The US current account deficit presently runs at 2.6% of GDP, which is below worrisome levels. Should the incoming government push for early trade restrictions, reaction (including Asian sovereigns reducing their holdings) could increase US funding costs, which runs against the interest of the Trump team.

Instead of counting on risk aversion to stop the JPY depreciation, we expect nominal yield differentials and the Fed moderately hiking rates to unleash capital outflows from Japan.The yield differential argumenthas become more compelling with the BoJ turning into yield curve managers. Via this policy move, rising inflation rates push JPY real rates and yields lower, which will weaken the JPY. Exhibit 12 shows how much Japan’s labor market conditions have tightened. A minor surge in corporate profitability may now be sufficient, pushing Japan wages up and implicity real yields lower.

JPY dynamics are diametrical to last year . Last year, the JGB’s “exhausted”yield curve left the BoJ without a tool to push real yields low enough to adequately address the weakened nominal GDP outlook. JPY remained artificially high at a time when the US opted for sharply lower real yields. USDJPY had to decline, triggering JPY bullish secondround effects via JPY-based financial institutions increasing their FX hedge ratios and Japan’s retail sector cutting its carry trade exposures. Now the opposite seems to be happening. The managed JGB curve suggests rising inflation expectations are driving Japan’s real yield lower. The Fed reluctantly hiking rates may keep risk appetite supported but increase USD hedging costs.Financial institutions reducinghedge ratios and Japan’s household sector piling back into the carry trade could provide secondround JPY weakening effects

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Daily Financial News

Mexico raises interest rates, cites Trump as risk

The head of Mexico’s central bank says U.S. Republican candidate Donald Trump represents a “hurricane” sized threat to Mexico.

Banco de Mexico Gov. Agustin Carstens told the Radio Formula network Friday that a Trump presidency “would be a hurricane and a particularly intense one if he fulfills what he has been saying in his campaign.”

Trump has proposed building a wall along the border and re-negotiating the North American Free Trade Agreement.

Mexico’s central bank raised its prime lending rate by half a percent to 4.75 percent Thursday, citing “nervousness surrounding the possible consequences of the U.S. elections, whose implications for Mexico could be particularly significant.”

Mexico’s peso had lost about 6 percent in value against the dollar since mid-August. It recovered slightly after the rate hike

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