Financial investments in stock trading

Investments in Forex have become available to private investors relatively recently.

Until 2000, this was the exclusive domain of multinational companies, investment exchanges and hedge funds.

At its core, Forex trading is making money by buying and selling currencies of different countries when the exchange rate changes.

The emergence and rapid development of the Internet has made changes to the operation of the exchange and opened up the possibility of investing in Forex for private investors online.

Deposit requirements have been reduced due to the introduction of leverage. Now, to start trading, it was enough to have a couple of hundred dollars in your account.

Advantages of Forex trading and types of strategies

The main advantages of investing in Forex:

High profitability. According to statistics, over the past 26 years there have been positive returns in 21 years.
Profits in this market do not depend on global political and economic situations.
A transaction on the foreign exchange market allows you to hedge risks.

Several strategies are actively used in Forex:

Carry trade has developed in recent years. It comes down to buying high-yielding currencies (for example, the New Zealand dollar) and borrowing in low-yielding ones (for example, the Japanese yen);
Momentum trading specializes in executing trades when a currency develops a trend. This strategy is mainly used by financial institutions to hedge risks;
Value trading involves the assumption that a currency has the ability to return to its fair value. By forecasting and selling at the right time, the holder makes a profit.

There are several investment opportunities in this area. Let's dwell on them.

What is investing in PAMM accounts?

Investing in a PAMM account appeared at the end of 2008. Developed and implemented this method. The essence of this method comes down to the following steps.

The trader concludes a deal on a PAMM account, and the profit received is divided between the participants of the PAMM deal, which includes the trader himself and investors.
The amount of income received is proportional to the size of the deposit made.
Today this concept is quite common. It refers to any managed trading account that contains the combined funds of the trader and other investors.

Money is credited to a PAMM account using standard payment instruments if you have a personal trading account.

All transactions will be carried out for you by the trader you choose. The income received will depend entirely on the correctness of the choice made and the competence of the manager.

What is an investment in Forex trading?

One of the common ways to earn income online is by investing in forex trading. Foreign currencies are used as goods for purchase and sale. Income is obtained due to the difference in the exchange rate. The cost of a particular money depends on the demand and supply available for it. The greater the demand, the higher the rate.

The principle of Forex trading comes down to the following steps:

purchase of a certain amount of currency;
holding it until the course changes;
sale at the new rate.

The resulting difference is income. The only caveat is that you need to correctly predict which currency will grow and which will not. If the analysis is incorrect, income turns into expense.

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World commodity markets - main types and features of their work

In their most general definition and form, commodity markets have existed for many millennia, where, as a rule, the main trading platforms were either the market squares of feudal cities, or special auction markets, where everything was sold, from rice and oriental spices, to markets where slaves However, what is now understood as commodity markets has a completely different appearance, which began with the emergence of exchanges in Medieval Europe, where each participant had equal access to trading on the site.

In general, the essence of the principle of operation of commodity exchanges has changed little since then, only trading volumes have trillions in turnover and transactions are concluded not with a stock clerk with a receipt or ticker, but through powerful computer systems where multi-million dollar transactions are carried out with one keystroke.

The main commodity exchanges in the world are considered to be such well-known sites as:

Chicago Mercantile Exchange (CME) , where the main exchange transactions are contracts for pork, cattle, wood, coffee, cocoa, sugar, pepper, grain, seeds;
Chicago Board of Trade (CBOT) - specializes in grain and edible oil sales;
New York Mercantile Exchange (NYMEX) - the main ones are contracts for non-ferrous metals and energy resources;
The International Petroleum Exchange (IPE) is one of the leading platforms for trading hydrocarbons and energy resources;
The London Metal Exchange (LME) is the main exchange for trading futures contracts for metals, including all groups of precious metals.

In addition, there are specialized commodity exchanges, for example, the Diamond Exchange in Brussels and Prague, and the Fur Exchanges in Toronto and St. Petersburg. There are special exchanges where auctions of art, antiques, etc. are held.

In Russia, the main trading platforms where trading in commodities and derivative financial instruments are carried out are:

Commodity - Raw Materials Exchange of St. Petersburg,
Moscow Exchange (futures contracts for metals and oil).
CJSC National Commodity Exchange, which presents futures contracts for the following commodity groups - sugar, rice and wheat. Trading for these groups of goods takes place only using futures contracts (Table 1).

Mostly goods traded on commodity exchanges are either commodity items themselves in physical delivery volumes or the “spot” market, or in the form of special derivative financial instruments - futures and options.

The main goal of exchanges when creating contracts is to attract producers and consumers to the market, this explains the fact that the emphasis is on delivery contracts, under which physical delivery of the underlying asset is carried out. Speculators or those who use derivatives for insurance (hedging) are more interested in a settlement contract - without physical delivery. In this case, only funds are credited/debited from the participant's trading or brokerage account.

What is the attractiveness of trading and investing in commodity markets, including using derivatives?

As a rule, such advantages from the point of view of an investor or trader include:

relatively correct cyclicality of the market, which is due to the periodicity of supply and demand for commodity assets, as well as the seasonality of some goods, especially food
the absence of strong “volatility” in the commodity market makes it possible to use low-risk investment strategies.
entry into the market does not require large initial capital, and many futures contracts, such as Brent oil, can be traded in small amounts
less exposure of the commodity market to speculative and insider transactions, relative resistance to political risks
you can select any set of instruments for your trading or investment position, based on the desired time frame and the amount of initial capital.
the ability to insure or hedge your trading or investment positions in the market.

In general, the most liquid instruments of the derivatives market in Russia are futures contracts for oil and gold, wheat and raw sugar; trading in other commodities is extremely irregular. At the same time, despite some positive dynamics in the volume of trading in futures contracts, their volume is extremely small. For example, the turnover of fixed-term commodity contracts on the MICEX per day rarely exceeds 1-2 billion rubles, which is extremely small.

If we take foreign trading platforms for comparison, then, for example, on the CME (Chicago) the daily turnover of corn futures with the nearest delivery month alone amounts to more than $50,000 million. Thus, formally there is a Russian market for futures contracts for food products, but in reality the buyer or seller cannot do anything on it.

The reason for this is a number of factors:

limited range of traded product groups;
lack of alternative derivative instruments, such as options;
inertia and conservatism of Russian producers and consumers, who prefer direct deliveries of their goods to counterparties, losing a lot of potential profit on discounts and rebates.
The low liquidity of the derivatives commodity market allows large players to manipulate prices on Russian trading floors, which in most cases eliminates the point of competition on such exchanges.

Trust management

Opening an account and 1 year of service 0 rub. 4% on the balance for everyone. 5.5% on the balance for medium and large businesses. Bank "EnergoMashBank" - www.energomashbank.ru

Investments in trust management in Forex come down to the correct choice of a specific project that will bring you profit on a monthly basis. The principle is as follows:

find an experienced investment expert;
invest money in his project;
entrust him with making decisions on your behalf;
make a profit after deducting a percentage to the expert for the work done.

In total, in Forex there are three possibilities for investing funds under trust management:

Hype companies that are pyramids. They do not engage in currency trading, they simply create an appearance. The convenience of these companies lies in the small amount of investment and the promised high profit. Some advise using their services for diversification;
Brokers who actually make transactions in the foreign exchange market. They work in offices that select a whole team of traders. This allows you to compensate for the failures of one at the expense of the other. Before entrusting your funds to the chosen broker, carefully read the reviews on the Internet;
Platforms with PAMM accounts located on them, managed by one trader. In this case, your funds work together with the manager’s funds;

The choice of the type of trust management depends entirely on your personal preferences and correct analysis based on the available information.

What is fiduciary investment through a trading platform?

Before answering this question, let's know what a trading platform is.

In fact, this is software that allows a trader to carry out transactions, receive the latest information in real time, and analyze the situation.

Investments in trust management through a trading platform can be of different types:

Traditional . In this case, the software is installed on a computer or laptop with a mandatory network connection. The most popular types of platforms are Meta Trade 4 and Meta Trade. They are clear and simple even for beginners. Their significant disadvantage is channel failures;
Software for a mobile device allows a trader to be aware of market events at any time. Such a platform must be synchronized with the computer. This makes it possible to open and close transactions at any time. Platforms are developed for Mac, Android, iPad and iPhone;
The web platform allows you to conduct transactions on someone else's computer. To do this, just go to the website of your brokerage company, enter your accounts and password. All the necessary information will be before your eyes;
Automated trading involves conducting transactions at any place and time through special terminals.

The choice of platform is entirely up to you. Before installing the software, think about what interface will be convenient for you, what tools are needed, etc. Be sure to check the platform ratings. Remember, the right software is one of the components of a successful transaction.

Turtles vs. Hares

In addition to the obvious subjective reasons for such statistics (huge psychological stress, lack of discipline, excessive risk, etc.), there is also an objective one. There is still no reliable method for predicting the market. All trading strategies are built on the assumption that the future of prices depends on the past. This may work for limited periods of time, but the longer they are, the more the market resembles statistical chaos.

As Nassim Taleb illustrates with many examples, major events cannot be predicted. He calls these accidents, which break statistics and form a new reality, “black swans.” A trader trading according to the system is initially limited in his choice by the framework of an artificial theory that operates with average values.

No trading system can operate in abnormal volatility mode. For this reason, a cautious trader who has “bitten off” a little profit tries to pause, fearing sudden market movements. But sooner or later his system gets into trouble and quickly loses all the accumulated profit. The investor buys the market as it is, with all its “black swans”. He doesn’t know when or where to expect them, but he is a priori ready for their appearance, the feeders are set up, food is stored. An incident may “kill” one currency or stock, but it will never bury the entire economy, behind which stands the power of business and the authority of the state (if any!). Exceptions (like 1917 in Russia) happen, but they happen once every century. It is interesting to compare the returns of equity markets in the most developed countries over a period of more than 100 years.

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This table shows how much each dollar invested in the markets would have grown in 1900. The almost zero return of the Russian and Chinese markets is due to long periods of interruption in their functioning. At the same time, negative values are not observed in any of the markets. It is important to note that these figures show the effective return obtained taking into account adjustments for inflation.

During the period of time under consideration, the world experienced 2 global wars and many crises. Millions of stock speculators went bankrupt. But the simplest possible strategy, “buy and hold,” also turned out to be the most resistant to testing. The legendary Jesse Livermore died in poverty, and retirees travel on stock dividends. The table presents data not for stock indices, but for a wide range of stocks, reflecting the “average temperature in the hospital.” Growth in indices tends to be faster because they are based on market leaders. The world's oldest stock index, the Dow Jones Industrial Average, dates back to 1896, when it was first calculated based on the stock prices of the largest 12 companies. During all this time, only General Electric remained on this list, and the number of companies gradually increased to 30.

The chart of the Dow Jones index resembles the takeoff of a rocket and does not even show the failure of the Great Depression, but then it seemed that the market would not recover. Since the index's maximum drawdown in 1932, its value has increased 600 times. But the main secret of investment income lies not in the stock price itself, although this is also important.

Using computer analysis, it was found that the probability of experiencing a loss when investing in DJ index shares for a period of 5 years is approximately 0.25. This means that one in four investors will suffer losses. On the one hand, the risk is quite high. But this is not 80-90% of traders’ unprofitable accounts! But when investing for a period of 25 years (of course, taking into account portfolio rebalancing when the index calculation base changes), the probability of receiving a loss is 0.03, i.e. 97 investors out of 100 will profit. If we take into account that dividends are paid on shares, then the risk of a total loss tends to zero. Let's now look at the performance of the DJ index since 1896, but taking into account dividends paid. By the way, it was precisely the period of the “Great Depression” that was distinguished by an abnormally high dividend yield (up to 15% per annum) against the backdrop of cheap shares. As they say, comments are unnecessary.

Reviews

Reviews about investments in the Forex market and the instruments used are quite mixed. However, they allow you to get a general picture of this opportunity to invest and increase your funds.

Before you decide to make money by selling currencies, you should understand that this process is accompanied by a high risk of losing all your funds.

Most experts recommend that novice traders do not chase high percentages and do not take unnecessary risks.

If you do not have the necessary knowledge and skills, it is better to spend time and find a good, competent broker for yourself. Many who have income in Forex tend to pay people a percentage for the work done, but have a stable monthly income.

Another convenient and low-risk way to invest in Forex is automatic trading. Excellent for a person who does not have the necessary skills and knowledge, and provides the opportunity to make a profit from transactions. However, the final choice is made solely by the individual.

Investments in Forex, with the right approach, provide the opportunity to receive high short-term income with a small investment of funds.

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What about in Russia?

Since 2003, the “Best Private Investor” (BPI) competition has been held annually in Russia. It would be more correct to call it a competition for high-frequency traders, because... many participants make hundreds of trades per day. The duration of the competition was 3 months, and the criteria for winning at different times were both absolute income and percentage return. The allotted time leaves participants with only one trading option: high-risk intraday scalping.

Other tournaments are also held periodically, with even stricter regulations. There are no recognized trading masters on the Russian market; tournament winners “fade into the shadows” and do not appear on lists of wealthy people. Representatives of brokerage companies claim that the purpose of the tournaments is to make the stock market attractive to the mass investor. In reality, high-frequency traders bring them much greater profits than investors. In April 2012, during the “Exchange Trading and Investments” exhibition, a tournament was held between 7 traders with extensive trading experience on the Moscow Exchange. Each participant had 2 hours of time and an initial amount of 200 thousand rubles. The winner was A. Beritz, who made 189 transactions during this time and earned 3973 rubles. or an average of 21 rubles. for 1 deal. The performance of other participants was even lower, which in terms of amount is already comparable to the commissions of Russian brokers.

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The winners of LCI competitions show a total profitability of 6000-11000% in 3 months, but admit that such trading on an ongoing basis is devoid of common sense. Thus, according to Natalia Orlova, known in trading circles as “Smeshinka,” her style is very risky and does not involve setting stops. As an argument in support of trading, she cites her own unsuccessful investment experience, when Yukos shares fell first by 30% after the arrest of P. Lebedev, and then after the arrest of M. Khorkovsky, panic began. The argument “take everything from the market while it gives” is also popular abroad, and not only among newcomers. Thus, Lance Roberts, chief investment strategist at Clarity Financial, adheres to the rule: “the main thing is not to outperform the bull market, but to minimize losses in the bear market.” For example, using short transactions when all assets fall in price.

However, he himself admits that swinging the market and widening the spread is the path to the abyss when there is no one “on the other side of the deal.” As for the already mentioned A. Beritz, he is popular as an expert and teacher of trading, but is no longer able to compete with trading robots: “In general, there are few people left in the market - 1%, those who trade after 10 years... I see robots frontrunning me , when I put 50 or 100 contracts on the exit... Nothing can be done about it. How is the weather. You won’t do anything against the wind.” And also: “How can you trade on one monitor? Why complicate your life? This is suicide. So far I have 6 monitors.” That says it all. Classic stock trading is becoming a thing of the past; the markets are controlled by corporate supercomputers. The man retains the old classics: leisurely and thoughtful investing, selecting assets that last for years.