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Retail investor quarterly trading trends

Analysis of Q4, 2022 trading data from Capital.com.

peter hetherington

CEO, Capital.com

In a year of turmoil, retail investors have once again shown they are prepared to adapt their trading strategies in the light of disruptive market events – whether that is in response to the impact of central bank interest-rate meetings on trading the GBP/USD currency pair, Russia’s invasion of Ukraine on oil and natural gas prices, or the fallout sparked by the collapse of Sam Bankman-Fried’s cryptocurrency exchange FTX.

Throughout all of this, digital platforms such as Capital.com, have played an important role in helping level up the access to the financial markets so that people can act on their own insights and analysis, and trade more easily.

What have retail investors chosen to do with their capital in the fourth quarter of 2022? An answer to that can be found in the exclusive data contained in Capital.com’s sector-leading trading platform – which has been ranked among the top five brokers in the UK and globally, by online broker comparison site BrokerChooser. Analysts, financial professionals and journalists can once again obtain a valuable glimpse into the trends exhibited by our global community of retail investors, thanks to our latest Capital Pulse quarterly report.

The main themes that have emerged from the data during the fourth quarter have been the increased adoption of short trading positions among our traders (up from 26% in 2021 to 37% in 2022) and the continued resurgence of stop-loss orders, which reached a new platform record of 12.9% of Q4 transactions.

In addition, our traders also demonstrated their resilience when it came to modifying positions during moments of elevated volatility, as was seen during GBP/USD trades in response to the tax-cutting mini-budget proposed by the former UK chancellor Kwasi Kwarteng.

For more information about Capital.com and our global community of traders, visit our website’s Media Centre.


Across the markets

The Capital.com platform provides traders with access to more than 3,700 different instruments across numerous markets: shares, exchange-traded funds, currencies, commodities and indices.

As of the fourth quarter, the Capital.com group reported trading volumes in excess of $1trn for 2022. We have group entities located in the UK, Cyprus and Australia that are respectively authorised and regulated by the UK Financial Conduct Authority, the Cyprus Securities and Exchange Commission and the Australian Securities and Investments Commission.

Highlights from this report

Selected key insights drawn from the trading data in Q4 2022:

In the light of bearish market moves in the fourth quarter of 2022, trader behaviour evolved to include an increased adoption of short trading positions. The index market witnessed the greatest rise in short trades (43%).

As asset volatility became an increasing feature of the markets in Q4, our traders’ use of stop-loss orders increased to around 12% of the platform’s trades.

US tech stocks (US100) – along with oil, natural gas and gold – topped the list of most-traded assets on the Capital.com platform.

Our clients actively traded risk events to take advantage of volatile market conditions, as evidenced by spikes in the total number of GBP/USD trades following US Federal Reserve and Bank of England meetings.

Capital.com traders demonstrated their engagement with major risk events when they tripled the number of GBP/USD trades, reduced their net-long holdings in the pound for net-short positions, and increased the number of stop-loss orders on cable trades following the UK’s disastrous mini-budget that pushed sterling to a record low.

When it came to trades relating to the wider US stock market (US500), our clients became more involved when stock markets declined rather than rallied within that bear market. They appeared to follow the path of least resistance lower.

After Japan’s currency intervention in September to support the yen, traders tried to ‘catch the falling knife’ and buy the dip in USD/JPY following Japan’s second intervention in October.

In contrast to large non-commercial traders, Capital.com retail investors preferred short positions on EUR/USD in Q4 2022. They switched from long positions in the summer when the euro slipped below parity with the US dollar.

The strategy of buying the dip also came to light when our traders tried to chase cheap buys in the tech-heavy US100, after tech stocks achieved their lowest values since the Covid-19 pandemic began.

A divided bearish and bullish attitude in long and short positions developed in Q4, after China decided to loosen the zero-Covid policy which had been plaguing productivity since the pandemic began.

Only the equity and cryptocurrency markets saw an increase in the length of trades, while the total number of trades across all asset classes dropped off as traders battled with the most difficult trading conditions in a generation.

Turmoil in the cryptocurrency market induced by the collapse of the FTX exchange resulted in increased interest in the cryptos solana (SOL) and cronos (CRO). Dogecoin also saw increased interest following entrepreneur Elon Musk’s takeover of the social media platform Twitter.

Risk-management summary

Capital.com has seen record use of an important risk-management tool in Q4 2022 that lets our traders automatically exit a trade before losses mount up: stop-loss orders.

After a determined effort to educate our traders with guides and videos, the use of stop-loss orders on the Capital.com platform rose to 12.9% for the fourth quarter of 2022. For more about this, see below for Risk management: Stop-loss orders at record high.

Regular stop-loss orders are triggered automatically at the specified price level. However, they are not foolproof during times of heightened market volatility: if the asset price moves significantly past the stop-loss level in a matter of seconds, the order may be executed lower (or higher in the case of short trading) than the specified price, which effectively means that the loss will be greater than expected.

That’s why there’s also an option to set a guaranteed stop-loss (GSL) that guarantees to exit the position at the exact price set, despite the volatility. A guaranteed stop-loss typically comes at a cost as it involves the broker taking on extra risk. At Capital.com a guaranteed stop-loss is charged as a percentage on the opening volume for the client.


A look back on the trading trends of 2022

Following the pandemic’s two years of bullish moves in risky assets, 2022 has served as a reminder to Capital.com traders that markets may also fall and reverse their major trends.

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