Online trading

How online commerce has changed in 2020 and what lies ahead for 2021

It’s fair to say that while the past few years have seen a series of unpredictable social and political events triggering market volatility, the dramatic price swings we’ve seen since the start of 2020 are unlike anything we’ve seen before. have seen before in our generation. The COVID-19 outbreak, the nationwide imposed shutdowns followed by the global economic downturn, as well as the US election, have all had a major impact on markets, as the e-commerce landscape has become more digital and densely populated. .

The increased levels of volatility spurred by these events have certainly presented investors with opportunities to make a nice profit. And in the meantime, it is now much easier for people to enter the world of trading thanks to the rise of fintech companies offering innovative and intuitive mobile and desktop trading platforms, which have opened up trading in line to the masses.

In 2020, with the Bank of England slashing interest rates and savers’ yields to historic lows, and the lockdown giving people more time to educate themselves and try something new, now is not the time. has never been riper for people to take advantage of. platforms and immerse yourself in the world of online trading. The numbers back up the story: In September 2020, CNBC reported that online trading activity “increased significantly” in the first quarter of 2020 compared to 2019, with people looking to make big financial gains from volatile market movements.

Markets in overdrive in 2020

Last year we saw several examples of stocks that saw strong price gains after starting from a low base – great news for investors who joined us when stock prices were much higher. low. The best examples of these actions – which may not come as a huge surprise in hindsight, but which are, of course, much harder to predict in advance – came from companies that provided offices with the means to continue to function and individuals the chance to stay in shape and in contact with family and friends throughout the various periods of confinement.

For example, video conferencing company Zoom rose from relative obscurity to become the go-to communication tool for many to stay connected last year. With the need for video calling not diminishing in 2021, Zoom shares are now selling for between US$370 and US$390 per share, a staggering price rise since March 2019, when the company filed its first IPO filing. on the stock market at just US$36 per share.

Zoom was far from the only company to experience a major price hike in 2020. DocuSign, a technology company that enables organizations and individuals to sign documents electronically – a capability that has become essential for many industries in era of lockdown and working from home – is another example. Riding the wave of customer demand, DocuSign has seen its prices increase by approximately 200%. Meanwhile Peloton, the popular exercise equipment company, has also seen prices rise by around 350% as gyms remain closed and people look for other ways to stay in shape.

Investors can also trade stocks that are falling in value and are likely to make an equal profit. It’s called “short selling,” and it’s basically when traders borrow a stock that they bet the price will go down, sell the stock, and then buy the stock back later to return it. to the lender. If the stock price drops as expected, the short seller buys it back at a lower price and the difference between the sell price and the buy price is the trader’s profit. Traders can also express the same view of the market without the complex processes via contracts for differences (CFDs), by simply opening a short position with a dealer, allowing them to profit from downward price movements.

There are many examples of companies and industries that experienced significant price declines last year due to the pandemic in which investors allegedly executed the short selling strategy, including a number of airlines, hotels and cruise lines, as well as the hospitality and leisure sector. in general.

Protect assets in unpredictable markets

While increased market volatility certainly provides more opportunities for profit, there is also an equal possibility of making a loss. The surge in online trading by newcomers, combined with extremely unpredictable market movements over the past year, has seen many succumb to financial loss. Investing is an art, and in addition to learning to keep the pulse, traders need to understand and recognize their appetite for risk. That said, it is possible to take advantage of risk management tools with some brokerages for those wishing to trade in riskier climates.

Although not yet widely available in the retail market, increasingly powerful risk management tools are slowly entering the market to give traders a cushion if the market moves in a different direction than that they had planned. There are a range of different risk management tools out there, and some even go so far as to offer full loss protection for a set period of time, which is a great option for those new to the game or who prefer extra support .

Outlook for 2021

Last year may be the most volatile year in our recent history, but the start of 2021 has yet to show signs of market stabilization. In just a few weeks, the economy has already faced price fluctuations due to the end of the Brexit transition period, the ban on the sale of crypto derivatives to retail consumers, as well as an army of retail traders who attack the short-circuited ones. Wall Street actions to drive up prices – like GameStop, AMC, Blackberry and silver – driven primarily by a community of Reddit users.

Global markets are also still vulnerable to the continued impact of the pandemic. While there is positive news with mass vaccination programs underway across the world, there is some concern about new variants of the virus slowing our progress towards a return to market stability.

There are still many uncertainties ahead in 2021 – from the end of the pandemic to what Brexit will really mean for the UK – but what is clear is that there remains an abundance of opportunity to make great gains for those who wish to invest. As markets remain volatile and interest rates remain low, we can expect to see more people trying their hand at online trading, especially as platforms continue to innovate and media sites social media continue to capture a wider audience in the trading world. This opens the door to an exciting world of opportunity, but one that must be approached with caution. The message for traders is: grab the opportunities, but understand the risks and take steps to stay safe.