A recent
study by a retail trading provider, Capital.com uncovers that traders who
diversify their portfolios and maintain longer position periods tend to benefit from higher profitability. Comparatively, those focusing on one market or closing
positions quicker are not as successful.
Capital.com Points to
Diversification and Longer Timeframe
Analyzing
the trading behavior of 100,000 global clients between May 2022 and April 2023,
Capital.com found that traders dealing in five different asset classes
typically profited from 60% of their positions. In stark contrast, traders who
concentrated on one asset class on
average reaped profits from only 48% of their positions.
Interestingly,
despite the promising profitability of diversified trading strategies, just 15%
of Capital.com’s clients trade across five different asset classes. Most
traders (65%) tend to explore between two and four different asset classes. At
the same time, 20% of clients restrict their trading to merely one asset class.
“Diversifying
your investments is a solid approach to counter the challenging market
conditions,” Daniela Hathorn, the Senior Market Analyst at Capital.com,
stated. “Spreading the risk across different asset classes, companies, and
investments can effectively manage risks and prove more profitable during
market uncertainties.”
The data
additionally drew a strong link between the duration traders keep a position open and their profitability. Traders who maintained positions between 30 minutes to six
hours were more likely to close with profits, averaging 44%. What is more, they
have utilized stop-losses more frequently.
First-Time Traders Show
Success in Trading FX, Commodities, and Indices
Capital.com’s
report also unveiled first-time traders’ tendencies to yield higher profits
when trading commodities, foreign exchange (FX), and indices as opposed to equities. Between May 2022 and April 2023, beginners who started trading with
commodities saw profits from 58% of their positions. Those starting with
equities profited from a lower result of 46% of their trades.
“In
light of the increasing interest rates and fluctuating company earnings, it’s
less surprising that first-time traders found more profits from FX, indices,
and commodities than single stocks in the past year,” Hathorn pointed out.
Table: Trading
commodities first gave the highest success rate
To assist
new traders in better understanding financial markets and making informed
decisions, Capital.com provides a learning app called Investmate. “We
prioritize education and learning to ensure our clients have access to the best
learning aids and analysis tools to help them make informed trading and
investment decisions,” Hathorn concluded.
Execs Move from IG to
Capital.com
During the last
eight months, the retail trading broker made a few important changes in its
executive lineup. In the most recent move since March, the London-headquartered
brokerage announced the appointment of Simone Manni as the Head of Commercial
Marketing in Europe.
A month
earlier, the company appointed IG Group’s Niamh Byrne as its Head of UK and
Ireland. Byrne joined the company after spending 14 years at IG Group. In the
meantime, Capital.com has onboarded Greg Adams as the Head of Risk. Like Byrne,
he took over the role at Capital.com from IG.
In October
2022, Capital.com hired Alessandro Capuano as its Head of Europe, which came as
a push for the broker’s growth ambitions in the continent. This was the third
talent transfer from IG to Capital.com in recent months.
This article was written by Damian Chmiel at www.financemagnates.com.
