Carl Illing of ActivTrades explores how technology has changed the way businesses operate and advises on how traders can deal with a world still in crisis mode.
Who would have thought that when the Covid-19 pandemic subsided, we would fall into the next crisis mode. Completely new information had to be processed on the financial markets in 2022.
The Ukraine conflict has shaken the global community to its core and brought the most violent atrocities of war back onto the map of Europe.
The associated increase in energy prices is partly responsible for the return of inflation, which we thought was dead, and which is still on our minds to this day.
Investment strategies that are formed through systemic research can help the retail investor make better-informed decisions by considering the broader economic and social context in which companies operate.
Systemic research involves analysing the interconnected relationships between different factors such as economic trends, industry performance, market conditions and government policies.
By looking at the larger picture, the educated investor can gain a deeper understanding of the risks and opportunities the different markets and industries face, and develop his or her investment strategy.
One major factor that is currently affecting businesses is technology. The way that companies communicate, operate, and compete in the different markets is changing.
One example is the rise of digital payment systems and E-commerce platforms. With their introduction, companies can now reach new clients and areas worldwide.
At the same time, the advances in Artificial Intelligence (AI) and machine learning are allowing companies to gain new insights into customer preferences and behaviours. This leads to targeted and more personalized marketing strategies.
In the search for investment success in the financial markets, every investor - whether private or institutional - is confronted with an unmanageable amount of information.
With a realistic self-assessment, you quickly realize that you cannot process this wealth of information and condense it into an investment success on your own. In order to understand what is driving the performance of a portfolio, it makes sense to look at the factors and their application.
A wide variety of factors are used as filters to screen available company and price data to evaluate possible investment markets. Systematic investing is an investment approach that emphasises data-driven insights, scientific testing, and disciplined portfolio construction techniques to seek varied portfolio outcomes.
The mid-cycle environment is still a positive one for riskier investments, and clients remain invested with a moderate risk appetite. The exact rate of inflation and growth is uncertain and will probably remain controversial in the coming months, which means that volatility can be expected to persist.
Diversification remains the key to the construction of more robust portfolios. For this purpose, investors might also consider the partial allocation of their investment portfolio into hedge funds.
Aside from this macroeconomic stimulus, there are also a variety of factors driving general asset allocation. The fiscal priorities of the individual states are likely to be on infrastructure investments, while the fields of biotechnology, AI and equipment should be carefully observed. However, in 2023 and beyond, the topic of environmental sustainability will probably dominate some of the investment strategies.
The earth needs help. The most recent natural disasters around the world show that climate change is top of mind, and the urgency to address it on a scale of 1 to 10, sits at 9.9. It is real and everyone must do their part to avert what scientists have dubbed "the sixth mass extinction event".
Investment ideas that could drive markets in 2023 include the comeback of mega-cap stocks, carbon capture technologies breakthrough and the up-swing in the commodities super-cycle.
Diversify your portfolio by investing in a range of companies across different industries. This will reduce your exposure to the risks associated with a disruption in any one sector.
The savvy investor should also keep a close eye on regulatory developments. By staying informed about regulatory changes, investors can anticipate potential risks and adjust their investment strategies accordingly.
To take advantage of the volatile markets, traders can rely on state-of-the-art trading platforms. There are numerous trading platforms on the internet, via which speculative investors can trade in various financial products. These include stocks, bonds, ETF's, currencies, crypto and derivatives. Unfortunately, not all operators of such trading platforms are reputable and need to be diligent when making their selection.
What to look for in a trading platform
The best trading platforms should give the investor a wide selection of indicators and trading tools to further assist with analysing a specific instrument. For example, technical chart indicators help to assess the market and provide an overview of price developments in graphical form over time.
They identify trends, support and resistance levels, which then enables investors to find the right times for making buying and selling decisions. Indicators that show trends are called trend indicators or trend followers.
However, some of the most used technical indicators are: Moving Averages, Bollinger Bands, Relative Strength Index (RSI), MACD (Moving Average Convergence Divergence), Stochastic Oscillator. Traders often use a combination of technical indicators in their analysis.
But even more important than the user friendliness of the platform is the seriousness of a trading platform or the corresponding broker.
A trader can recognise a legitimate broker if the company ticks the following boxes: licensed and regulated by a reputable financial institution (Securities Commission of the Bahamas), offers client fund protection, knowledgeable and reachable customer service and segregated client accounts.
And where the broker is regulated should be of utmost importance to every trader. As seen during the fall of a well-known crypto exchange in late 2022, multiple international liquidators must sort through the chaotic aftermath of the collapse and work hand in hand with each other.
The main US liquidator praised the Bahamian Securities Commission for taking swift action to protect the digital assets held by the crypto giant from being hacked and stolen.
If you orientate yourself on the points mentioned, you reduce the risk that you will end up with a dubious broker and thus lose part of your capital or bear excessive costs related to your investment decisions and/or strategies.
Overall Systemic research is essential for all investors looking to capitalise on the opportunities in the various market segments. By analysing the broader economic and social context in which companies and clients operate, the investor can develop more effective strategies that are better aligned with the changing realities of the global business world.
The Bahamas Special Report 2023 Part One ezine with a comprehensive list of features and videos is available to view/read here.
By Chris Illing, CCO, Activtrades.