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Our Head of Sales Trading, Ashley Glover, looks at how to make the most of Dynamic Trading
There are a number of ways to use Dynamic Trading and Trading Books, from a simple day trading or intraday strategy, to the types of longer-term and dynamic strategies favoured by more sophisticated investors and hedge funds and fund managers such as ARK and Vanguard.
For every point the price of the instrument moves in your favour, you gain multiples of the number of units you have bought or sold. For every point the price moves against you, you will make a loss. Please remember that for retail clients you could lose up to the amount of your deposit.
Above everything else when looking at Trading Books, it’s important to have a strategy as well deciding on the timeframe of your trading, or your investment horizon. One common mistake new as well as experienced traders or investors make, is not separating their mindset when it comes to creating a strategy.
Investors and traders may have differing views on how a particular asset moves, approaching instrument selection with a variety of strategies on what position to take and when and how much of each position to take.
Using Dynamic Trading, you can implement multiple trading strategies within one trading account. As such, you can create a Trading Book for a day trading strategy or for intraday moves while also creating a separately funded book for more longer-term trading strategies. Dynamic Trading effectively allows you take advantage of all trading environments and create a book that works specifically for your needs.
Take advantage of current trends and themes and build your own custom version of an ETF. For example, you might be very bullish on crypto currencies and new technologies that a lot of traditional fund managers don’t currently like and won’t cover. With Dynamic Trading and Trading Books you can build your own funds based on the companies and assets you think will outperform traditional companies and assets over time. You could even take this concept to the next level with a pairs trading strategy.
Pairs trades are also popular when seeking to take advantage of divergences within specific sectors. For example, if you invest in the mining sector and think that BHP is undervalued compared to Rio Tinto or vice versa, then a strategy to go short on one and long on the other might be appropriate, in anticipation that the gap between the two prices will narrow.
The electric vehicle revolution has seen Tesla’s share price surge over the past few years, putting its value well in excess of the world’s biggest automotive manufacturers such as Ford, General Motors and Toyota. If you think the big global car makers are looking to play catchup, and have the scale to do so, this means that the gap between their share prices and Tesla could narrow. So you could go long on one automotive manufacturer and short the other, trading the potential convergence in prices.
Dynamic Trading can help because you’re able to create a Trading Book for your short-term trading positions as well as your longer-term positions, which means you can carry both positions in one account.
Traders and investors could even take all the strategies above an build a cross border portfolio. As previously mentioned, you might be very bullish new technology but feel some companies in other countries might not perform as well companies based in other countries. Based on this approach, you could build a long or short term portfolio of pairs trades based your views of various international stocks. You might feel EML Payments listed in Australia has more global growth potential than Paypal listed in the US or Tencent’s TenPay listed in HK so could buy EML and sell Paypal in the same portfolio and even choose which currency to build the portfolio in if you have a specific view of the AUDUSD exchange rate
Dynamic Trading and Trading Books really do give traders and investors a vast array of options to express their views of the global markets.