This article was written in collaboration with IG, the world’s No.1 CFD provider (by revenue excluding FX, June 2020). All views expressed in this article are the independent opinion of DollarsAndSense.sg based on our research. DollarsAndSense.sg is not liable for any financial losses that may arise from any transactions and readers are encouraged to do their own due diligence. You can view our full editorial policy here.
“Change is inevitable, and the disruption it causes often brings both inconvenience and opportunity”.
This is a quote from Robert Scoble, a popular blogger and technical evangelist from America. It’s also a quote that could describe the state of financial markets that we are experiencing today.
While the ongoing COVID-19 pandemic has adversely impacted some industries such as tourism, airlines, and F&B, one sector that appears to have continued doing well is the financial sector. In spite of the recession many major economies faced in 2020, traditional asset classes like stocks, ETFs, and indices have performed well over the past two years along with alternative investments assets like cryptocurrencies and NFTs. As trading and investment continue to be a hot topic that everyone around us seems to be talking about, we are seeing more investors and traders starting out on their investment journey.
One person who has gotten a front-row seat to this wave of interest in the financial world is Desmond Leong, the CEO of Everest Fortune Group, an SFA Certified FinTech firm that runs market analysis and strategic planning divisions of some of the world’s largest brokers and financial institutions. Everest Fortune Group specialises in combining both fundamental and technical analysis to accurately forecast the forex, indices, commodities and equity markets.
As part of the article series, #TheNewNormal, that DollarsAndSense is working on, in collaboration with IG, we had a chat with Desmond to understand what we should be looking out for when investing and trading in this new environment and his perspective on what is happening in the financial market these days, and whether the trends that we are seeing in the financial markets will persist in #thenewnormal.
Timothy Ho (Timothy): Lots of focus in the media has been on cryptocurrency and NFTs over the past year, but what about traditional asset classes like forex and commodities? Are you seeing a much greater level of interest in these asset classes as well in #TheNewNormal?
Desmond Leong (Desmond): Definitely! Interest and volume across these asset classes have risen tremendously and many retail investors and traders are getting into the space. In the commodity space, gold and black gold (oil) in particular are taking the centre stage.
Timothy: More people being interested in investing and trading can be a double-edged sword. On one hand, it’s good to see people being passionate about growing their wealth. On the other hand, there is a concern that many new investors and traders are drawn to the possibility of high returns in a short period of time, while neglecting the risk. Is this a problem that you are seeing?
Desmond: I do see it happening a lot – and it’s partly down to the FOMO (fear of missing out) culture that is much more prevalent in trading now. There are tons of forums these days filled with people talking (boosting) about making 100 to 1,000% gain in a month, and too few people sharing that, in pursuit of that, they lost their life savings as they disregarded risk management. When you’re chasing very high gains each month, you start to think that making 3-5% per month with a low drawdown is a bad thing (when it isn’t).
Timothy: Your team at Everest Fortune Group spends a lot of time analysing the various markets. Given this new wave of heightened interest in finance, are you seeing any shifts in trends in the forex, indices and commodity sectors?
Desmond: We are seeing an increase in demand for analysis for equities and cryptocurrencies. Time sensitivity of forecasts is also gravitating towards the short-term as opposed to the long term, possibly due to more people trading options and having one eye on the expiration dates along with having a newfound respect for time-sensitivity of forecasts.
Timothy: You work with many established financial institutions. How are these institutions approaching new assets like cryptocurrency and NFTs? Are they embracing them, slowly dipping their toes into it, or do they find it a threat to their own business that tends to deal with more traditional assets?
Desmond: In my opinion, cryptocurrencies are finally getting the recognition they deserve. Previously, only the big names such as Bitcoin, Ethereum and perhaps Ripple would be tradeable. Now, a lot more platforms have expanded their offerings to a much wider range of cryptos. In terms of NFTs, it’s still early and I don’t see platforms offering that anytime soon.
Timothy: Even with heightened interest in investing and trading, what do you think are some asset classes that are currently being overlooked by traders?
Desmond: Desmond: There are a lot of opportunities in the emerging and exotic currencies along with the smaller cap stocks that are being overlooked by traders. Some of these exotic currencies hit really close to home – with the SGD as one such example. Too often, we tend to have our eyes on the economic developments and news affecting the major currencies such as the USD, EUR and GBP to name a few while not realizing that everything that is happening around us in Singapore – from the COVID restriction rumours and even to potential Vaccinated Travel Lanes (VTLs) are actually really useful information we can use to trade the SGD.
Timothy: On a business level, what are some plans that Everest Fortune Group is embarking on for 2022?
Desmond: We aim to focus a lot more on the community building space as we noticed there are lots of people who are looking for both guidance and a community to bounce their ideas off.
Timothy: Final advice for anyone who is thinking of starting their trading journey in 2021?
Desmond: You don’t need to spend 30 years in the industry to be a good trader. You just need 30 days to learn the right things. One of the worst things to do is to run at full speed…in the wrong direction. Spend some time learning and getting up to speed. For those who are interested, I have a super comprehensive (and free!) video series on my site which you can check out: https://www.theforexarmy.com. It contains over 30 webinars I have done teaching advanced technical analysis. So, check it out!
Trade Multiple Asset Classes Via CFDs
Whether you are intending to trade traditional asset classes like shares, indices or forex, Derivative products like Contract For Differences (CFDs) are one way you can get exposure to such asset classes especially over the short-term.
CFDs are offered directly by brokerage platforms such as IG (the world’s No.1 CFD provider, by revenue excluding Forex, June 2020). CFDs are contracts between two parties to exchange the difference between the opening price of an asset and its closing price. These two parties would be the trader and the CFD provider (e.g. IG). With IG, traders can access more than 17,000 markets across different asset classes.
With CFDs, an advantage will be that traders can go long or short on markets, they can opt to take a long position if they think the prices of assets will go up, or a short position if they think the prices of assets will go down. This way, they can trade in either direction depending on their views on the market.
CFDs are meant for short-term trading as they typically employ the use of leverage. The use of leverage also means that traders need to manage their risks carefully. For example, we should put guaranteed stops for the trades we make to avoid losing an amount beyond what we are comfortable with on our trades. Another product that we can consider using would be knock-outs, which function in a similar way to guaranteed stops. But unlike guaranteed stops, when you can change the level at any point in time, with knock-outs, the maximum amount you are willing to lose on any trade is set at the point you enter your position.
The comic below helps illustrate how guaranteed stops work.
Besides ensuring good risk management control, constantly improving our knowledge as a trader is also important. For those of you who are new to trading, the IG Academy is an ideal place to pick up knowledge through online courses and live webinars that are regularly conducted. To access this, you just need to open either a demo or live account, both of which can be done easily online for free.
Read Also: Guide To Opening A CFD Account In Singapore
Disclaimer
IG provides an execution-only service. The information in this article is for informational and educational purposes only and does not constitute (and should not be construed as containing) any form of financial or investment advice or an investment recommendation or an offer of or solicitation to invest or transact in any financial instrument. Nor does the information take into account the investment objective, financial situation, or particular need of any person. Where in doubt, you should seek advice from an independent financial adviser regarding the suitability of your investment, under a separate arrangement, as you deem fit.
No responsibility is accepted by IG for any loss or damage arising in any way (including due to negligence) from anyone acting or refraining from acting as a result of the information. All forms of investment carry risks. Trading in leveraged products, such as CFDs, carries risks and may not be suitable for everyone. Losses can exceed deposits.
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