This supplement is an independent publication from Raconteur Media December 9 2009
TRADING THE MARKETS
Smunities
ince the earliest civilisations, trading has formed an inte-gral part of society’s devel-opment and growth. Com-Smunities bartered with each other to obtain locally scarce goods and devel-oped long-range trade routes, which they used to extend their influence. From these origins, the coffee hous-es of the City of London provided the backdrop for the trading of stock and commodity prices which were shipped to Britain from all four cor-ners of the British Empire. This de-velopment of trading links stoked the growth of Britain as a major economic power throughout the 19th century.Trading has now become acces-sible to anyone and everyone; the growth of the internet has meant that with just a few clicks of your mouse, you can buy gold from the comfort of your own home.Exchanges saw volumes grow at a strong pace until 2008 when the fi-nancial crisis caused traders, both big institutions and individuals, to exit the market until the situation was calmer. In the derivatives markets, volume grew at just 13.7 per cent in 2008 on the previous year, a far cry from the 30.9 per cent growth in 2007.SLUMP?Although overall transactions are pre-dicted to have slumped in 2009, the retail market has gone from strength to strength. Barclays Stockbrokers says volumes have grown 18-fold over the past decade, while spread betting and contracts for difference-provider IG Group has seen its business grow in the region of 40 per cent annually during the same period.Retail traders have not been put offby the recent market turmoil either. Des Byrne, head of Barclays Stockbrokers, says trading increased by more than 50 per cent in the 12 months to July 2009.All trading providers in the retail From barter to the internet:
rise of the retail trader
The web has driven a rapid growth in the retail market as smarter investors look for cheaper, faster and more flexible means of trading, writes Jessica Meadmarket cite the internet as the main reason why the retail market has ex-ploded. No longer are individuals restricted to trading shares through their brokers and being charged high commissions. The internet has lev-elled the playing field between insti-tutional and retail trading by tight-ening spreads, widening the range ofTurtle trading Curtis Faith tells how he was trained in the secret trading methods of Chicago’s renowned Richard Dennis. page 3markets and tools, as well as providing almost instant execution.The advent of the internet, and more specifically broadband, opened up the market, says Matt Tooth, man-aging director at IG Group, adding that rising transaction numbers has allowed retail providers to lower costs and offer services at a much lower price.For Daniel Kibel, director of busi-ness development at GoForex, the potential for growth is enormous. “It’s a lot more user-friendly than the traditional trading of shares because individuals can enter the markets with very small positions and they don’t have to have lots ofmoney to trade,” he says.Fab Forex Foreign-exchange trading is top of the pops but will it be number one in the New Year charts? page 7Atif Latif, a director at Guardian Stockbrokers, agrees. He says the new methods of trading, such as spread betting and CFDs, which are leveraged and available online, have appealed to younger people who are looking to actively trade a portfolio and have a higher appetite for risk. But Mr Latif notes that traditional investors, who would normally have stuck to buy-and-hold shares, are now starting to recognise the benefits ofusing these newer products to add a short-term and flexible element to their portfolios.CURRENCIESNot only are investors using more tools, they are also recognising there is more to trading than stocks and shares. George Xydas, director of international operations at FxPro, says: “Until about five to seven years ago, the foreign ex-change market was restricted to banks, partly because of regulation but also be-cause people were not aware they could invest in currencies. Currency trad-ing was considered to be an overlaying strategy for a portfolio used for hedging purposes. But today we are seeing more and more people looking at currency investing as an asset class in itself.”The profile of a retail trader might not have changed much over the past 30 years – usually highly educated, financially sophisticated and earning good money – but the internet has meant they choose a wider range ofmarkets using a greater number oftools and are able to take advantage ofchoppy markets.Individuals are increasingly eschew-ing brokers and taking control of their own investments and trades, whether buying gold, leveraged trading ofshares or diversifying into commodi-ties and foreign exchange. There are now few limits to what investors can achieve and retail traders are quickly realising this. Gold rush Prospects for commodities, particularly gold, shine bright amid the market gloom of recession. page 8