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Choosing the Best Broker for You

To trade online you need to select a broker who can execute trades and manage your account for you. Brokers offer a variety of account types and services so it is best to research which broker is the right fit for you dependant on your investing goals, educational needs and experience. Here we will take you through all the things you need to select the right broker for you. We even include an easy to use comparison table!

Choosing the best online stock broker can make the difference from an easy and exciting new experience trading to a constant frustration and disappointment. Accessing financial markets through online brokers is easy and inexpensive but there are so many out there tailored to a different sort of customer, how could you ever choose? With our help choose the right broker to optimise your user experience AND profits. 

What do you need?

Take some time to think what is most important to you when trading and be frank with yourself about your experience level and how much education and support you will need throughout your trading journey. If you’re a beginner, look for low fees and easy access to support, including tutorials and training videos on broker platforms. Whereas, if you are experienced, check what advanced features the broker provides, including data analysis tools and professional investment resources. 

Consider the following things to help judge your personal needs:

  • Are you an active or passive investor?
    • Do you want to be hands on, adjusting your portfolio with loads of trades each day or do you want to hold some long-term positions with little day-to-day activity?
  • What type of investments do you want to trade?
    • Different platforms are suited to different types of trading better than others. Will you trade stocks, mutual funds, ETFS? Or if you’re more experienced, are you interested in options trading, futures trading or fixed-income securities? For an experienced trader, getting the right broker means you may mean you will need to pay a little more but it’ll be worth it in the long run!
  • How much help do you need?
    • Do you want to plan and trade yourself, learning how to interpret charts and data? Or would you prefer to hire an expert who can manage your portfolio for you? Do you need plenty of access to support services or do you already know what you’re doing?
  • What are your investment goals?
    • Are you intending to supplement your regular income or make trading your day job? Are you trading to spend now or saving for retirement or children?

If you’re just starting out we recommend eToro and easyMarkets for their easy to use interfaces and fee -ree trading!

What makes a good broker?

Check these last things before committing to a broker!

A good stock broker in the UK is regulated by financial bodies such as The Financial Conduct Authority (FCA) to protect consumers and keep the industry in check. Look out for regulating authorities to ensure your broker is safe and fair to use. 

Check what security measures your broker puts in place to ensure you and your data are being protected such as two-factor authentication, cookies and third party rules. 

The broker should be able to provide the right services for you whilst suiting your budget. A small premium is justifiable if the platform offers features you need. So look at the costs of different account activities to judge which broker works best for you. 

  • Opening account fee
  • Deposit minimum
  • Account maintenance fees – monthly/annual
  • Included access to trading platform
  • Trading commissions 
  • Advisory services

A great feature most brokers provide is running a demo mode so you can test out the platform before you commit or upgrade to a premium service. So give a few brokers a test drive, test the usability and any special features before you commit!

Now you know how to choose the best broker for you, what brokers are out there?

eToro and easyMarkets state that 75 % of retail investors lose their money when trading CFDs. Trading 212 state that 76 % of retail investors lose their money when trading CFDs. DeGiro provide a detailed ‘The risks of investing’ page here. You should consider whether you can afford to take the high risk of losing your money.

We recommend eToro and easyMarkets for beginners. Kickstart your trading journey with BullBear now.

Trading 101: What are CFDs?

Have you ever been beckoned by the big profits of CFDs? Then it’s time to learn more. Unlike a typical stock market transaction where you own a share, with contract for differences’ you get the difference in the products price over the time the position is open without actually owning the stock. This is great for people with low funds, but there are aspects of CFDs that can catch you out. 

What is a CFD?

CFDs or contract for differences are an investment type that allows investors to profit from price movement without owning the asset. This security essentially calculates the asset’s movement over the time the position is held rather than basing profit on the trades underlying value. So why is it called a contract? Excluding the true value of an asset is only achieved by a contract between the broker and trader, excluding stock exchanges. A CFD is thus an agreement between a trader and broker to exchange the difference in price at the time the contract opens to the point it closes. 

If you trade CFDs you don’t actually own the asset, instead you earn profit from the change in price. For example, if a stock has an ask price of £10 then 1 share is £10 plus any commission or fees the broker may charge. This means you must have £5 free in cash to carry out the transaction in a typical investor account, where a broker holds a 50% margin. If you were carrying out this transaction as a CFD, brokers require only a 5% margin, equivalent to only 5 pence, that needs to be available as free cash. 

Why are CFDs so popular?

You can access the asset at a much lower cost than if you were to actually buy it, making it much more affordable. This is as CFDs have a much higher leverage than traditional trading. Leverage in the CFD market is controlled by regulators and could be anywhere from 3% to 50%. A lower margin requirement means you need less free cash to invest with and therefore can achieve higher returns than a traditional account with the same cash. 

Furthermore, you can short CFDs at any time without borrowing costs. This is one of the perks of not owning the underlying asset!

Another great thing about CFDs is there tends to be less fees. There are normally no transaction fees and no limits on trading over more than one day. This is great news as usually beginner traders are off put by brokers taking their money. Although you must note the ‘fee’ for the transaction is taken by entering you at a negative position at your buy point. 

Short falls of CFDs

However, there are a few short falls to trading CFDs that you should be aware of. Although the profit you can achieve from CFDs for the same economic cost is much greater, when you take out a CFD, your initial position is decreased with a loss equal to the size of the spread at the time you enter the contract. This starts you off on a bad stead. For example if the spread is £1 at the time you choose to enter the position, then the asset needs to gain £1 in the market for you to break even. Whereas, with a typical market transaction where you actually own the stock, then a £1 move in the market would be profit!

Another disadvantage is there is higher risk when trading CFDs than stock markets. There tends to be weak industry regulation, poor liquidity and the need to maintain a margin. You may have heard of stories of people pouring and pouring their money into CFD accounts to keep their contracts open. A big catch is that you can trade assets worth a greater price than your portfolio. For example if an asset falls, and falls below the float held in your CFD account you have to make a stressful decision. This means essentially you must close a position at a huge loss or are in debt to the broker if you keep the contract open. 

If you hate transaction fees and don’t have a large starting fund then CFDs might just be the answer to your prayers! Always understand the risk before you trade. Or practice with BullBear

Warren Buffett: What’s his strategy?

Warren Buffett is arguably the greatest investor alive today. He recently celebrated his 90th birthday as the fourth richest person in the world with Forbes estimating his net worth at $82.3 billion, this is more than the net worth of Tanzania! What is his trading strategy and how can we follow his phenomenal success?

How did he get rich?

After graduating from Columbia Business School he started his career as an investment salesperson. Less than a decade later he was controlling Berkshire Hathaway. Buffett’s company Berkshire Hathaway would shock you with some of the mega-companies. in their investment portfolio. The portfolio holds stakes in 44 companies summing to $207 billion.  In fact the top five in his portfolio are the biggest names in America and perhaps the world. Here they are:

  1. Apple (NASDAQ: AAPL) $89.4 billion
  2. Bank of America (NYSE: BAC) $22 billion
  3. Coca-Cola (NYSE: KO) $17.9 billion
  4. American Express (NYSE: AXP) $14.4 billion
  5. Kraft Heinz Co (NYSE: KHC) $10.4 billion

What is his strategy?

Buffett follows the Benjamin Graham school of value investing. They look to invest in securities with surprisingly low prices compared to their worth. By focusing on stocks which are undervalued by the market, using the efficient market hypothesis, the market will eventually trade the stock at a fair value, thus making the investor profit. The idea is that the stock market will catch up to match the stock value of a corporation to its intrinsic value.

The key part of Buffett’s investment strategy is finding companies that are undervalued. You must judge a company’s intrinsic value through analysing fundamental data, going through financial statements, profit margins and records of debt. By comparing the intrinsic value to its current market capitalisation you can determine if a company is undervalued. Buffett took a holistic outlook to decide which companies to invest in, ignoring how the stock performs in markets and instead looking at the companies’ potential. He investigated companies as a whole including company performance, company debt and profit margins. Buffett fundamentally invests in companies that have unrecognised potential that will earn him profit through an organisation’s long-term success.

Historical success will indicate if a company is worth investing in, the tricky bit is determining whether this success will continue. Buffett and his team invest in public companies as this gives them access to financial statements to base their investment decisions on. He tends to put his money into innovative products and services, those that stand out from competitors. This competitive advantage demonstrates how a company can succeed. Taking principles from ecology, it is the species that has its own niche that will perform best over time and this is true for any company.

Though Buffett’s investment style seems straight-forward and logical, the particulars are something we are unlikely to ever know. That is what made his fortune but it might not necessarily be how you make yours. BullBear offers a route into investing successfully from a platform to start you off trading risk-free to comprehensive tutoring on how to trade successfully. Check us out here

Why green stocks are more lucrative than ever

An increased awareness and falling costs has made renewable energies and other green stocks a lucrative option for investors. Clean energy equities have strongly outperformed the S&P 500 over the past three years indicating the decline in fossil fuels is here to stay. Read on to learn more about green stocks and what to look out for before you invest. 

Globally environmental awareness has led to the increasing interest in green stocks. Not surprisingly the green energy industry has been on the rise over recent years with greater concern for the environment welcoming more sustainable energy sources and dumping polluting practices. 

Investors looking for environmentally responsible yet financially sound investments have a lot to choose from as the sector is growing at an exponential rate. To achieve profit with peace of mind offers green stocks as the perfect investment opportunity. 

What are green stocks?

Photo by Oleg Magni on Pexels.com

Green stocks are stocks in environmentally conscious companies who offer sustainable products or services. However, how green a company is debatable. Where large hydro-power projects substitute fossil fuel consumption for renewable clean energy, there are huge negative impacts on local societies and ecosystems. Green companies may be anything from a revolutionary product that cleans polluted waters to the best of a bad lot. Not all companies are environmental heroes but still gain the green badge by offering the least environmentally damaging practices in their industry.

Green stocks are often shadowed by renewable energy solutions, yet it is good to bear in mind green nanotechnology and green chemistry sectors also fall under the umbrella. Transforming how products are manufactured and reducing hazardous materials follows a rudimentary transition to a green economy providing hot investment opportunities.

What is greenwashing?

Greenwashing is the practice of appearing more environmentally conscious than in reality. Companies may release a corporate responsibility statement or sustainability policy with vague claims to improve their environmental standpoint, but you must look into the facts and figures to determine whether a company is truly green. Most corporations will divert you from their environmentally damaging practices and instead bring your attention to the few projects that are environmentally friendly. Corporate responsibility is a huge buzzword in which companies spend massive portions of their budgets to sculpt the perfect green image to display to the public. It is all about advertising – there is often a lot hidden under a green exterior. 

Greenwashing can seriously affect stock value – if a scam was ever to be exposed then consumers lose faith and go elsewhere where investors start to follow. To try and spot a company greenwashing, look for environmental statistics rather than promises and big budgets that can distract you. The devil is in the detail.

Photo by Alena Koval on Pexels.com

Should I invest in green stocks?

It begs the question whether the success of green stocks is based on its lucrative growth opportunities or whether heightened environmental concern is the reason investors choose this sector. Some investors choose green stocks due their high growth potential and financial success. Whereas other investors choose green stocks out of true concern for the life of our planet. Do your research to look for companies that align with your own personal environmental interests or just keep an eye out for a lucrative balance sheet.

The global economy is slowly switching from greenhouse gas emitting fuels to cleaner, renewable energies. Renewable energy is growing at an exponential rate, comprising 50% of all energy generation by 2024 (according to the International Energy Agency). The brightest future is for solar with onshore wind and hydropower closely following suit. Solar energy is the most affordable, accessible and prevalent type of renewable energy and is now economically competitive to fossil-fuel polluting energy sources! Look out for solar stocks especially as the top grower to buy a greener future. 

With Biden as president elect, renewable energy stocks have gained ground and fossil-fuel stocks have slumped with the promise for more green energy legislation. Biden’s greenwave will push alternative energy sources over the next few years under his pledges to “transition from the oil industry”.

Furthermore, green stocks are environmentally friendly companies which have the support of consumers AND  governments. Governments can offer subsidies and tax incentives that support the profit of a company. In the UK, the government offered a £24.5 million fund for green business support in 2019 and are said to maintain investment to make going green easier for companies in the future. However, it is difficult to balance government decisions on whether it will help or hinder green stocks. As on the one hand a government may revoke their environmental subsidy and green stocks may suffer, but on the other hand they may introduce high environmental taxes on competitors wrecking their profitability.

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Who shall I invest in?

If you are unfamiliar with any green industries it might be best to start investing in a green index such as the RENIXX Renewable Energy Industrial Index or exchange-traded funds (ETFs) such as the Invesco Solar ETF or the iShares Global Clean Energy ETF. This means you invest in a diversified portfolio which will protect you from loss. Alternatively, if you are looking for specific renewable energy companies, then look for high cash flow and strong balance sheets as these companies have greater potential for growth. You could also look at how much capital a company allocates to renewable energy projects that produce high returns. After all, the point of investing is to optimise your returns. 

Top green stocks: 

  • Nio
  • SolarEdge
  • Tesla
  • Brookfield Renewable Partners
  • First Solar
  • NextEra Energy
  • Enphase
  • Byd Company
  • JinkSolar

There is a huge opportunity for growth in green stocks but you must be careful to look out for a strong balance sheet when choosing which stocks will be most profitable. Want to practice trading before you invest? Download BullBear, for risk-free trading practice. 

Do women make better investors than men?

Despite there being fewer women in the stock market, research has shown women outperform men when it comes to investing. Studies found only 45% of women invest compared to 63% of men, yet women achieve 1.8% higher returns over a three year average compared to their male counterparts. So why do female investors have an edge?

Hargreaves Lansdown found women have an edge, finding women had an average return 0.81% higher than men over three years. If this was compounded over 30 years, an average woman’s portfolio would be 25% greater than the average man. A study by Warwick Business School tracked the performance of investors over three years to find women outperformed the FTSE 100 and received much higher returns than men. Where men only achieved an average 0.14% higher than the FTSE 100, women achieved an annual average return of 1.94% greater than the FTSE 100. 

Why do women tend to invest less? 

Women are less likely to invest in the stock market, which isn’t a huge surprise in this male-dominated industry. This might be due to a lack of role models as there are much fewer high-profile female investors than men. Ever heard Geraldine Weiss? She is one of the world’s most successful traders yet does not nearly get as much press coverage as her male counterparts. Weiss hid her gender for decades to get an even standpoint for investing.  How did she do so well? She kept her cool and never let emotions or overconfidence affect her decisions.  Everyone has the potential to carry these features to trade successfully, however, women naturally hold a greater tendency towards these traits.

Photo by Karolina Grabowska on Pexels.com

How do women tend to invest?

Women tend to prioritize cash savings over stocks and share investments, a study by YouGov found 55% of women have never invested compared to only 37% of men. Women tend to make less risky financial decisions as there is a greater fear of loss. Women tend to stay away from making money quickly and opt for the slow but less risky road to achieving profits. A study by Warwick University found women tend to invest in funds that produce consistent profit over volatile individual investments. This way the investment is diversified and the risk is spread across a number of companies, reducing losses. While it might seem playing it safe shouldn’t reach greater rewards, there is a much greater guarantee of profit. Men tend to be overconfident and are more likely to buy more on a high and sell more in losses, based on their greater affinity for impulsive behavior. Furthermore, women tend to trade less frequently than men, Hargreaves Lansdown found women traded funds 67% less than men, suggesting women have a much longer term eye for investment. This outlook means trading costs and transaction commissions are dramatically reduced for women, who tend to invest more conservatively. 

Why should women invest?

It is important for women to at least be aware they can achieve financial equality and independence, as historically, especially in some cultures, women are dependent on male family members or partners. In the face of change, investing is one of the ways women can match or exceed the potential of male counterparts to gain wealth. Having a well-balanced savings and investment portfolio is crucial to ensuring one’s personal and family’s well being. A long term goal like a house, wedding or starting a family can be achieved by investing the right way. Holding cash in a bank with low interest rates will hold you back from achieving your goals, whereas investing in a fund will gain profit higher than a regular savings account and push you further. 

Women are in the minority when it comes to investing and there are countless reasons for this. But that doesn’t mean they can’t invest and achieve profits the same as men, or better. Investing in your future is essential for everyone, whatever gender. Start your trading journey with BullBear

Trading 101: What is Day Trading?

Day trading has a reputation for being high-risk high-reward which can leave beginners in the gutter. Day trading requires skilled technical analysis, self-discipline and objectivity. This type of trading is highly profitable, but has a low success rate. The complexity and high risk of day trading is not for the faint of heart. Furthermore, critics say active trading strategies such as day trading do not perform as well as a passive strategy, on average. But don’t let this put you off learning about it!

What is Day trading?

Day traders are active traders who profit off price changes within a single day. It is most common in the foreign exchange and stock markets and are usually for more experienced traders as day trading requires knowledge and large funds. Day traders use high leverage assets to make profit on small price movements, such as highly liquid stocks and currencies. Day traders are looking for market movement and often look for events in the news to judge what to trade that day. Traders can follow an economic calendar to see scheduled announcements of corporate earnings or economic reports. Sudden moves created from these announcements are what day traders make profit from, as there is a period of adjustment between company news and share price.

Here are some strategies employed by day traders:

  • Scalping: this strategy makes profits on very short-term and small changes in price. A trader may do tens to hundreds of these microtransactions in a day.
  • Range trading: this relies on support and resistance levels to judge when best to buy and sell. 
  • News-based trading: this type of trading looks for news events that will increase volatility temporarily to make profit.
  • High-frequency trading: this strategy utilizes algorithms that exploit tiny inefficiencies in the market.

What you need to Day trade

Knowledge

To successfully day trade, an in-depth understanding of how markets work and strategies that work to make profit from short-term positions is required. Certain skills are utilized by experienced traders to make day trading profitable, having a good grasp of technical analysis and chart reading are among the most useful. Building your knowledge of the marketplace is fundamental to success. In particular, try and understand the specific behaviour of the products you trade to better grasp their market patterns. Foreign exchange and liquid stocks are popularly traded as they have a high volatility and therefore a high potential profit which is good for these short-held positions. 

Capital

Not only do you need experience under your belt but you need fat stacks in your pocket. Day trading isn’t something everyone is equipped to do. It is best to use risk capital – money which you can afford to lose – to protect from major losses that could lead to bankruptcy. 

Discipline

Discipline is another fundamental for day traders as following a specific strategy is the best path to profit. By setting a plan at the start of the day and specific criteria for trading you can control and optimise your trading success. It also allows you to examine and improve your trading strategy to optimise profit.

Kit

Perhaps it’s a trading desk at a large company or perhaps it’s a home office, the right trading set up is crucial to harness profits and day trade successfully. Access to a live news feed will inform day traders of key events indicating times to buy. There is software out there that analyses important news feeds to direct you to the most important stories. Every minute counts with day trading! Furthermore, you would need some fancy kit – analytical software that can recognise patterns and generate algorithms to predict future price movements will really help you out. But it’ll set you back a fair amount. 

Rules for day trading

  • Plan your trades when you wake up
  • Trade your plan, don’t let emotions get involved
  •  Manage risk
  • Always take profits
  • Respect Stop Losses – you’re playing with the most volatile assets!

Day trading can be difficult to master and requires a lot of time and effort to succeed. If you have an idea of your risk tolerance, capital and trading strategies then do go ahead – after you’ve practised of course. Day trading is hard to do part time as your full attention is required when markets are open and needs a fair amount of experience to succeed. If you do decide to try out day trading then focus on a very specific asset class and really learn how it moves. A good strategy will mitigate losses!

Do you aspire to be a day trader? Start small and build up to day trading! Download BullBear’s app to practice trading risk-free. 

The race for a vaccine isn’t over.

After Monday’s breakthrough announcement by Pfizer, the 90% effective vaccine is dominating stock market news, but you must keep an eye out for other vaccines in the race. Pfizer’s vaccine doesn’t mean the game is over as pharma corps continue to compete to produce an effective vaccine suitable for distribution.

Pharma stocks to watch.

Stocks have rallied after Pfizer’s press release earlier this week with the CEO cashing out 60% of his own shares, worth $5.6M, the same day as the announcement. While some stocks have boomed including the S&P 500 and the Dow Jones Industrial Average, many have dropped.  Those companies which are not going to benefit from the vaccine include Zoom, Citrix Systems and others that have been thriving during the pandemic. Other top winners include Rolls-Royce who hugely support aerospace and Cineworld as hopes raise that cinemas will reopen sooner than thought. 

A Pfizer vaccine by 2021 would be a game changer for investors with reflation trade thunder the microscope. However, there is a lot of room for setbacks as Pfizer is yet to release exact data from their clinical trials and only have preliminary safety results. Furthermore, coronavirus will inevitably mutate and there is no certainty as to how quickly Pfizer’s mRNA vaccines can be adjusted accordingly.

For much of 2020 biotech has performed well in stock markets as there is an increased demand from the higher rate of illness worldwide. The front runners from now on will depend on if other vaccine producers can match the rate of efficacy of Pfizer. But overall pharmaceutical companies should continue to thrive. Especially with the split Senate and House which will protect biotech in the US and a Biden win pledged to boost support for healthcare in the US, which will likely float pharma corps.

Why do we need more than one vaccine?

There are several different types of vaccines with various rates of effectiveness. Each type is better suited to different population groups, winners will have better success in those vulnerable to coronavirus like the elderly or BAME groups. Therefore health ministers won’t be settling for the first vaccine out there. There is speculation on whether the Pfizer vaccine is safe and effective in elderly groups as the details of who the vaccine has been previously tested is yet to be announced. 

Thankfully the type of vaccine Pfizer have developed is prime for easier and efficient distribution. Pfizer’s vaccine uses mRNA technology which is faster, cheaper and safer than other types of vaccine. 

Who else is in the race?

Other pharma crops are said to be very close to producing other types of vaccines against coronavirus. Runner-up pharma’s include AstraZeneca, Johnson & Johnson, 0.02%, Inovio Pharmaceuticals, -9.22%, Novavax, 9.41% and Sorrento Therapeutics, 13.16%. Pfizer’s results have shadowed other vaccines being developed which will lead to a lower demand for other COVID19 treatment avenues.

Moderna is up 4.52% as people clock on that their work to develop an mRNA vaccine is proven possible. Moderna’s mRNA vaccine works in a similar way to trigger antibodies as the Pfizer vaccine and is likely to have positive results that are due to be announced on 22nd November. The validation of mRNA technology boosts confidence in all of Moderna’s projects with stocks projected to increase long-term.

CureVac, another company developing an mRNA vaccine, saw stocks rise 5% on Monday as hopes were raised for other successful vaccines. Although CureVac’s vaccine has produced promising results, they have only completed a Phase 1 trial so there is a long road ahead.

Other Covid vaccine candidates who don’t use mRNA technology including Johnson & Johnson, Novavax and GlaxoSmithKline stocks gained 3% on Monday with Astrazeneca up 2.4%. Though if their hard work will prove fruitful is another question.

While all attention is on Pfizer, other pharmaceutical companies shouldn’t be forgotten. Keep up to date with the latest news with BullBear

Pfizer Vaccine Boosts Stocks

Today Pfizer has hit the headlines announcing their coronavirus vaccine with BioNTech giving hope to people across the world. The drug company Pfizer’s shares jumped 14% after the announcement of their vaccine, a true milestone in scientific history. The FTSE 100 followed suit, soaring by 5.5% immediately after the vaccine announcement, including shares in Informa soaring by 44% and International Airlines Group by 39%.

The race for a vaccine among pharma giants is over. Pfizer’s vaccine, said to be 90% effective, has been tested on 43,500 people so far across six countries and proven safe. The company plans to apply for emergency approval to use the vaccine before the end of November means the end of the pandemic is in sight!

Stock markets have already been rallying after Joe Biden was confirmed president. The clear end to the election buoyed markets, but traders could never have predicted today’s charts. This morning’s announcement of an effective vaccine has produced unprecedented stats in the stock markets with economic recovery in the pipe-lines has set rises across sectors. 

All the sectors hardest hit by coronavirus have seen record-breaking surges in share price. Travel, hospitality and events are rejoicing with the news that the pandemic will hopefully come to a close by 2021 and they can resume business. Airlines have seen the biggest gains with aerospace engineers Rolls-Royce rising 45%, British Airways owner IAG soaring 35% and EasyJet increasing 31%. The hospitality sector has also seen huge gains, catering company the Compass Group’s shares soaring 40%. 

We will see a sharp reverse in the thriving market of online shopping sparked by the recent wave of lockdowns as the public holds out for shopping in-store. The vaccine announcement has already caused Ocado shares to drop by 9& and Just Eat by 7% with many other companies that have made profit during the pandemic set to make a U-turn. 

It is very early days in terms of the practicalities of cost, manufacture and distribution  of the vaccine, which likely means the vaccine will only reach the public in the early months of 2021. Although there is a wait before we will see results from the vaccine, 2021 is looking like a much brighter and prosperous year. 

Act quickly to make the most of today’s market changes. Keep up to date with the latest stock market news and trends with BullBear

Trading 101: What is Cryptocurrency?

You may have heard that PayPal now accepts Bitcoin as a legitimate currency, this is a huge breakthrough for crypto supporters! Will we start seeing more companies accepting cryptocurrencies over the next few years or are they dead in the water?

Cryptocurrency has an average daily trading volume nearing Forex making it a huge success since the first digital currency (Bitcoin) was launched in 2009. Many people believe cryptocurrency is the future, what do you think?

What is Cryptocurrency?

Cryptocurrencies are digital currencies which were created by private bodies. At the moment they are not legal tender so you cannot pay for things in the same way you can with the pound or the dollar, but the future is bright for cryptocurrency. 

Blockchain is a type of technology that regulates cryptocurrencies. Cryptocurrency is created, distributed, traded and stored in this decentralised ledger system. 

There are alot of types of cryptocurrency, the most popular being Bitcoin, but names such as Litecoin, Ethereum, Ripple and Stellar may also be familiar. 

Bitcoin is the first and largest cryptocurrency by market cap. It was created in January 2009 after the housing market crash. You can’t physically hold a bitcoin as they are a digital currency, however you can see everyone’s ownership through access to a public ledger. Your personal balance of Bitcoin tokens are kept using keys, which is essentially an encrypted password. So although your personal Bitcoin balance is private, there is a public element to it! So you may be wondering who regulates the transaction of Bitcoin? Miners are people who process the transactions on the blockchain in return for rewards (new bitcoin releases) and transaction fees (paid in bitcoin). Miners act as the decentralised authority to make the Bitcoin network credible, similar to central banks for national currencies. However, Bitcoin are released according to an algorithm and the schedule is available beforehand, whereas national currency is released at a rate matching economic growth to stabilize markets. Bitcoin mining therefore is the release of bitcoins into circulation, some say all bitcoin will be released by 2150 so there is plenty of opportunity for growth. 

How can cryptos make me money?

There are two ways you can make money. The first is by buying and therefore getting ownership of cryptocurrencies through a cryptocurrency exchange and is best for long-term investment. There is often a fee and commission so watch out for sites which are looking to rip you off!

The second way to make money off cryptocurrencies is by trading them as CFDs, where you are essentially betting on the direction of price change. This is better for short-term trading as price fluctuations can be rapid and there are holding fees for CFDs which you don’t get with cryptocurrency exchanges.

Is it worth it?

There are pros and cons for trading cryptocurrencies as with any asset, so heres the run down. 

Pros

  • Volatility: Cryptocurrencies are around 100x more volatile than forex currency. Cryptocurrency has no managing bodies to regulate their price, they are purely influenced by market forces. This means they fluctuate, A LOT. But this is actually good news as higher volatility means more opportunity to profit from changes in the market, but beware with high volatility comes high risk. 
  • Low leverage: Trading cryptocurrencies usually has low leverage of around 2:1 due to the high risk and volatility of the asset class. Therefore you are unlikely to make losses enough to make you broke!
  • 24/7: Brokers typically open cryptocurrency markets on weekends meaning you can trade all week round.

Cons

  • Cost: Cryptocurrencies have a fairly high commission compared to most asset classes, with Bitcoin charging around 0.4%. This doesn’t mean you can’t make a decent profit, it is just something to bear in mind for short-term traders.
  • Sensitivity: Most cryptocurrencies are smaller than national currencies and are therefore more sensitive to issues such as integrity, adaptability and popularity. 

Cryptocurrency is an amazing invention but it isn’t the easiest to trade. We’ve just covered the tip of the iceberg! We recommend you learn more before you start investing in crypto and practice before you invest with BullBear.

US Election | What’s happening to stocks?

The uncertainty brought by the US election race has led investors to focus on the dollar with a rise by 1% against most global currencies. The dollar had a fair few ups and downs last night as Trump saw higher success than expected. Some surprising currencies have weakened including the Chinese yuan, Australian dollar and Norwegian crown. Share prices in Wall Street’s Dow Jones Industrial Average will start low today. Read on to learn more about how the US election will affect stock markets. 

If Trump stays on

While history cannot predict the future, studying the past can give an indication of events that will unfold. During the past 14 elections half saw the president serving a second term, which drove stocks to gain on average 14.4% the following year. Where a new party taking office has previously led to a market fall of 1% the following year. This is based on more certainty with  keeping the same party in office as policies are unchanged protecting businesses from new regulations and standards that could harm performance. However, this is based on fairly stable US economies, which is fair to say is not the state today.  A key indicator of results in past elections is that all presidents who have avoided recession have made it to a second term. Trump has not achieved this and has been heavily criticized for his failings in handling the coronavirus dubackle. But in general, a Republican win supports stock prices as policies favour boosting earnings and profits. Where a Democrat win will see reduced equity prices as the focus is on retribution of wealth and tackling social rights. 

A Biden win

Share prices will boom with a Biden victory as the Democrats achieve a massive stimulus package sparking investors to go long on commodities, short on the US dollar and short on US treasuries. If Biden continues to pull votes in the six outstanding states (Nevada, Wisconsin, Georgia, Michigan, Pennsylvania and North Carolina) a victory would lead to a higher path of inflation and a weakened US dollar. So watch this space.

What sectors are riding the high?

The healthcare sector is booming with pharmaceutical firm Astrazeneca up 4.4%. This is as with the current Biden majority, pharmacorps have the opportunity to use their donation history as leverage for possible renegotiations once he takes the White House office.  

However, if neither party achieves a decisive win the huge fiscal package will be disputed. A marginal Biden victory will likely be worse for risk assets. With uncertainty across markets, investors have turned to the high growth of the tech sector.  The US futures market will boom today when trading opens with Nasdaq futures likely up 3%!  A Trump win could push Nasdaq even higher, although this is all speculation at this time. 

So what’s happening in the UK?

Today the pound is recovering some losses as the election race continues and a Joe Biden Victory is likely. This is triggered by the larger stimulus package the Democrats will be releasing that will bring down the US dollar. The performance of the pound over the next day or two will depend on how tight the election results are, with every Trump win the pound will get weaker. 

Growth has dipped in the UK this October and will continue to fall as new COVID lockdown restrictions are put in place. FTSE 100 is up 0.2% today under the muddle of the US election outcome. With unemployment rates increasing the economy will continue to struggle. The near future is fairly bleak. The UK economy is on track for a double-dip recession this winter with a slow and challenging recovery through 2021. The tighter restrictions in the UK service sector including hospitality, travel and leisure has seen a near stall this past week. With record low growth this summer, further limits on growth will have serious repercussions. 

With many hours and possibly even days before an overall result there is a lot of volatility up ahead. If you’re inexperienced, stay well clear. Keep up to date with the latest stock market news with BullBear.  

Trading 101: What is Forex?

Currencies need to be exchanged to conduct foreign trade and business, making foreign exchange markets the largest and most liquid assets in the world! If you want to learn a little more about the pros and cons of forex trading, read our article.

Forex is one of the oldest assets to be traded and is regulated by governments. Before the internet only large multinational companies and hedge funds traded forex as it required high amounts of capital. But thanks to the internet, it is much easier to trade forex, brokers can allow individuals easy access to the foreign exchange market no matter their budget. 

What is Forex?

Forex is shorthand for foreign exchange, and can also be noted as fx, it describes a global market of exchange between currencies. Forex trading covers the highest trading volume of all assets with daily transactions pushing into the trillions! A currency pair/ cross is the exchange rate of two currencies quoted against each other e.g. EUR/USD. The currencies that are traded the most include the U.S. Dollar, the Euro, the Japanese Yen, and the British Pound. 

Forex as an asset class works slightly differently to others as you can earn from differences in interest rate as well as from changes of currency values. You can profit from the difference between two interest rates in two economies by buying the currency with the higher interest rate and shorting the other currency. This is called a ‘carry trade’. 

Forex is most commonly traded as Contracts For Differences (CFDs). CFDs are almost like a bet, where you agree the pair will rise or fall in the market to make a profit or loss. This is different from other ways of trading as you don’t hold ownership of the asset, but instead are deciding which direction the asset will go in a contract with the broker. Forex traders often trade in the short term for profit as long-term trades do not suit its characteristics.

Pros & Cons of Forex

Some people swear by forex due to the following characteristics:

  • Low Volatility: This is because central banks can control currencies demand and supply through monetary measures, to optimize stable exchange rates. 
  • Low Cost: The cost of trading is fairly low with commission commonly at 0.08% of the asset’s value. Other asset classes, including cryptocurrencies have much higher commission rates.
  • 24 hours: The retail forex market opens Monday morning set to eastern time zones and closes Friday night according to U.S. time zones meaning you have 5 full days to trade with! Although the best time is 9am-12am New York time each day. 

The risks: 

  • Unregulated: National banks have varying degrees of regulation meaning forex instruments aren’t standardised across countries. You should check which forex dealers are regulated so you are protected and trade safely.
  • High Leverage: You can sell above the amount of money in your trading account as brokers consider the low volatility of forex. This means you can carry out a large trade with a small account balance at around 100:1! Beware that extremely high leverage can make dealers become insolvent with no notice. 
  • Need specialist knowledge: Having a thorough understanding of economic fundamentals and indicators is necessary to understand how different economies adjust their currency values. It is also key to see how different economies interact as this will affect which currency pairs are more or less profitable. 

Forex trading is great for beginners with low funds who want to be active everyday. For people with larger funds and longer-term horizons forex is not the way to go. If you want to start trading forex we recommend you learn an overview of the macroeconomics that drive different currency values and practice before you invest with BullBear.