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The Halloween effect – Is your portfolio spooky enough?

When I first heard of the ‘Halloween effect’ in a trading context, I dreamt up day traders to trade spider cookies for doughnut hole eyeballs and mummy pretzels on the trading floor. 

 

Sadly, the Halloween effect is not actually as delicious, but it’s still worth getting to know! The Halloween effect is a market-timing strategy, which various industry experts have thoroughly studied. 

 

The Halloween effect comes hand-in-hand with the old Wall Street adage, “Sell in May and go away”.

 

Sven Bouman and Ben Jacobsen were the first to study and document a robust seasonal effect on returns of stocks and indices during the November to April half-period. After examining data from global stock markets, they found that stocks offer better returns during this ‘winter’ period. 

 

Since then, any further studies have just reaffirmed their initial argument, i.e. the persistent effect of this seasonal anomaly across most stock markets. 

The Halloween effect - Is your portfolio spooky enough?

“Sell in May and go away.”

While researchers identified this significant seasonality to stock markets, they failed to explain what causes the Halloween indicator. 

 

Returns in November through April, on average, are significantly higher (5-10%) than those in May through October. But why do markets tend to perform better in the November to April months? 

 

Some experts indicate the impact of summer holidays on market liquidity. Others suggest that this phenomenon can relate to the negative average returns during the ‘summer period’ rather than the superior performance of markets during the winter period. 

 

Is the Halloween mystery spirit behind this consistent and persistent market-timing strategy? No one really knows.

Halloween stock market lingo

Do you know that the said Halloween spirit is all around Wall Street all year long? It lives in the Wall Street lingo!

 

We’ll share with you two of the spookiest terms used in stock market trading to add to your trading jargon, along with the Halloween effect. 

 

Dead cat bounce: Unlike the bad luck accompanying a black cat, it might mean something good when you encounter a dead cat bounce. A dead cat bounce in stocks means a momentary, brief rise in a declining stock or index price. 

 

Witching Hours: Double, triple or quadruple witching happens when markets collide and cause heavy trading volumes. Four times a year, groups of financial contracts expire on the same day and the same time. Witching happens in the final trading hour of stock market sessions on the third Friday of March, June, September and December.   

 

Trick or treat? If you are more into treats, Eurotrader offers more than 2,000+ instruments for you to eat (boo haha, sorry) trade as CFDs.

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News

Eurotrader Group announces the launch of Eurocapital

Eurotrader Group is branching into multi-asset liquidity provision with the launch of Eurocapital, its new institutional arm.

 

October 2021, London: Eurotrader Group has announced the launch of Eurocapital, an institutional offering that is also the Group’s debut into multi-asset liquidity provision. 

 

Eurocapital is a Prime of Prime liquidity provider that delivers highly bespoke full-circle solutions and secure offerings, with products spanning forex, equities, CFDs and futures. With decades of expertise, the Eurocapital team draws on its experience and relationships to give clients access to Tier 1 liquidity, top-of-book prices and exceptional fill rates.

 

With a rich banking heritage and a strong institutional network, the firm is equipped to construct bespoke prices based on Tier 1 bank relationships and Eurocapital’s own liquidity, ultimately providing minimal market impact solutions to its clients.

 

Bolstered by superior technology, Eurocapital’s offering is also complemented by ultra-low latency and uninterrupted trading flow, ensuring maximum efficiency and fast execution. The firm also has a network of third-party distribution hubs and co-located API connections that together form a robust international infrastructure and seamless connectivity.

 

Eurocapital is also integrated with a range of professional trading platforms and technologies, including Bloomberg, MetaTrader 4, MetaTrader 5, CQG, SS&C Eze and Trading Technologies.

 

Commenting on the launch, Matthew Kent, Director Institutional Sales, said:

 

“Our foray into institutional and professional services marks a very exciting time for Eurotrader Group. This new endeavour is a direct response to evolving market needs, which largely centre around the demand for increased flexibility and individualised solutions. Eurocapital is committed to and equipped for raising the bar of flexibility, customisation and excellence beyond what is standard today.”

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Facebook’s sell-off – A series of unfortunate events

“Hello literally everyone”, Twitter joked about the Facebook (FB) outage on Monday. For other social media, Facebook’s loss turned into a gain. During the outage, many users turned to Twitter to share memes and jokes about the six-hour global blackout. 

 

On Twitter, the hashtags #facebookdown, #instagramdown, and #whatsappdown were trending.

 

Since then, Facebook is undergoing its worst sell-off of the year following its worst-ever blackout (which took down everything from WhatsApp to Instagram) since 2008. It was so significant that the situation urged a public excuse from Chief Executive Officer Mark Zuckerberg.

 

The social media giant’s stock suffered additional pressure after a whistleblower and former FB employee charged the company with “prioritising their own astronomical profits before people.”

 

With so much negative news swirling around it, FB stock has plunged. 

 

This begs the question, how does social media affect markets?

 

People turn to social media, whether it is for social networking, news or business. Therefore, there is a growing monetisable market there. 

 

Social media benefits from digitalisation and growing online advertising, so they grow increasingly relevant. As a result, the industry outlook is very positive. 

 

At the same time, social media has become hugely important in stock trading. When social media make headlines, the relative stocks are highly affected. For instance, negative news back-to-back has been enough to send the Facebook stock tumbling.

Facebook’s sell-off - A series of unfortunate events

‘Facebook was down; Apologies to your WiFi’

As for the blackout, Facebook will likely reemphasise its importance to its users and advertisers – and in doing so, it might be a happy ever after for the tech giant.

 

But, looking at the FB stock price movement, the whistleblower story could have a great impact on Facebook’s bottom line; any discussions swirling around social media could increase the likelihood of intervention by regulators.

 

What’s more, the mounting regulatory examination could also impact the stock negatively.

 

Social media aside, however, Facebook is also a leader in VR. Considering its growth potential, it’s not surprising that many investors are shrugging off Facebook’s recent challenges. 

 

On top of that, while public sentiment has turned against Facebook in recent years, Wall Street has continued to reward its money-making talent.

 

In the meantime, why not take the opportunity to go long or short with a Facebook stock CFD? You will find FB among other social media and tech stocks (and 2,000+ instruments) offered by Eurotrader as CFDs.

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Are FAANG stocks getting old?

Whisky, cheese and pickles only get better with age, but does the same apply to FAANG stocks? In other words, are FAANG stocks getting old, and do we need a ‘new FAANG’?

 

If the term ‘FAANG’ means little more than vampire teeth to you, let’s get you up to speed: FAANG is an acronym for the most widely known tech stocks, which are Facebook, Amazon, Apple, Netflix and Alphabet (formerly known as Google). 

 

Other variations of FAANG include ‘FANG’ (someone ate the Apple) or FAAMG (Goldman Sachs’ version swaps Netflix for Microsoft). 

 

No matter what the acronym is, such mega-cap tech stocks always exhibit growth, as technology is a growth sector anyway. In turn, for many traders and investors, FAANG is like the ex-partner they go back to when they need comfort and familiarity after a new relationship doesn’t work out. 

 

The said giant tech companies have achieved year-on-year revenue increases and share price appreciation. What’s more, they highly affect the stock market thanks to their weighting in the S&P 500, as they make up approximately 15% of the index’s total market cap.

 

Considering the above, you might think of these stocks as ‘classics’. But can you even get classic stocks? We’re sorry to break it to you, but the answer is no. There’s no such thing as ‘classic stocks’, as the stock market is very volatile. Even safe havens turn out to be not so safe from time to time. 

 

Even if the FAANG five continues to grow, some market experts have already found the ‘new FAANG’: TAND (Tesla, Activision, Nvidia and Disney).

Are FAANG stocks getting old?

Shall I wave goodbye to FAANG?

Things change quickly in the normal world, and changes happen even faster in the business world. Ten years ago, Facebook wasn’t even a public company; we just knew it as a social media site for poking our friends and tending to our farms. And Netflix, back then, was still a DVD-by-mail outfit without any original content.

 

Such companies always look to remain relevant and invest in new technology. However, even highly successful companies and products don’t stay at the top forever. As consumers’ needs change, those creating such needs or finding solutions to problems are in the lead.   

 

For instance, Tesla is still the leader in electric vehicles in a world trending toward lowering carbon emissions. Apple has plans for the iCar – a self-driving or electric car –, but as the details are scarce, it remains unknown if it can compete with Tesla on the field. 

 

It seems that the most remarkable period of growth of FAANG is already behind us, even though they provide consistent growth at scale. But don’t worry: there is still a long way to go before we need to wave goodbye to them for good.

 

In the meanwhile, why not take the opportunity to speculate on their price? Eurotrader offers FAANG stocks among 2,000+ other instruments to trade as CFDs.

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Understanding commodity currencies

One of the most exciting aspects of forex trading is realising how dependent and correlated some markets are to each other. The case of commodity currencies and pairs is a perfect example of such correlation. 

 

Going back to our school years, many of us were left intrigued when we first heard about the ‘butterfly effect’. According to the chaos theory, a tiny change in initial conditions can create a significantly different outcome. Notably, in the butterfly effect illustrative example, the formation of a tornado can be influenced by a distant butterfly flapping its wings several weeks before. 

 

With the butterfly effect in mind, you can start to understand why, for instance, the Australian dollar has remained weighed down over the past weeks on the potential collapse of Evergrande, China’s most prominent property developer.  

 

So, it’s no surprise that there are strong correlations between different products and events in trading, just like certain currencies are linked to the global prices of primary commodity products. 

 

Countries with large commodity reserves are heavily dependent on the export of raw materials for their GDP. So, such economies are sensitive to changes in commodity prices. 

 

The dependency of specific currencies on commodities is what makes them a ‘commodity currency’. 

Understanding commodity currencies

The 3 top traded commodity currencies

The currencies with the closest commodity correlations are the Canadian dollar (CAD), the New Zealand dollar (NZD)  and the Australian dollar (AUD). Paired to the US dollar, these are called ‘commodity pairs’ and are among the most widely traded currency pairs. 

 

Australian Dollar (AUD)

 

The AUD currency is also known as the ‘Aussie’. Australia is one of the most resource-rich nations on the planet. As a result, Australia’s currency is heavily dependent on commodity prices, as it exports coal, iron ore, petroleum and gold.

 

Australia’s economy is tied with China’s economy. China is the global manufacturing and industrial growth giant and therefore depends on Australia’s primary commodities. 

 

Canadian Dollar (CAD)

 

The CAD currency is also known as the ‘Loonie’. Canada is the fifth-largest oil producer globally; therefore, the price of oil is a significant driver in the Canadian economy’s health. 

 

Canada’s economy is tied with the US economy, with approximately 75% of Canadian exports going to the States.

 

New Zealand Dollar (NZD)

 

New Zealand has a solid connection to gold and will react to movements in the commodity’s price. Also, New Zealand is the globe’s biggest exporter of milk products and exports other farm products such as meat and wool. 

Like the Australian dollar, the New Zealand dollar (also known as the ‘kiwi’) is affected by China. This is because China imports vast quantities of dairy products from New Zealand; therefore, kiwi’s value is linked to the volume of dairy products exports.

Other currencies with commodity price correlations include the Russian ruble (RUB), the Brazilian real (BRL) and the Saudi riyal (SAR). 

Why and how to trade commodity currencies

So, why do commodity-linked currencies attract traders? 

 

The nature of the commodity currencies allows forex traders to move in and out of trades quickly. Moreover, commodity currency traders can take advantage of the commodity price fluctuations. 

 

Some of the price movers of the commodity currencies include macro and monetary policy events and decisions. In fact, any event that can impact a commodity’s price can affect commodity currencies as well. For example, OPEC meetings, market sentiment, central bank policies and political tensions list factors affecting commodities and commodity currencies.   

 

Do you feel like it’s high time to trade commodity pairs along with the majors, minors, and exotics we offer? Then, just open an account with Eurotrader and enjoy our competitive spreads and super-fast execution.

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Why is the DAX30 changing to DAX40?

Thirty-three years following its birth, in July 1998, DAX30 has decided to grow up. As an adult child, Germany’s flagship stock index is not leaving the nest – it’s just bringing new additions to the family.

 

Deutsche Börse – the company behind the index – has decided that 10 more companies would join the nation’s premier DAX. The newcomers are largely known businesses expected to strengthen the benchmark and increase its quality. 

 

The DAX shake-up was decided in the wake of the Wirecard scandal. The German payments firm was suspected of fraudulently inflating its balance sheet. As a result, the financial services provider was the first DAX company to file for bankruptcy. 

 

The reform aims to guard the blue-chip index against any Wirecard-similar future crisis.  At the same time, the makeover is to align the German index with its international peers and attract global investors. 

 

As well as the debut of the 10 new companies into the German stock market barometer, a new regulatory framework and further structural reforms will also be implemented.

 

A transitional period will be put in place to give the index’s existing companies time to comply with the new regulations by September 2022.

Why is the DAX30 changing to DAX40

Which are the new kids on the block?

The admission of the new members will be completed by September 20, 2021, and is based on new entry criteria. Newcomers will cover a broader range of sectors, and the index will probably get a growth boost.

 

The DAX30 (DE30) will re-weight to include the following companies from the mid-cap universe (MDAX):  

 

  • Airbus [AIRG.DE] – an aerospace manufacturer
  • Zalando [ZALG.DE] – a multinational ecommerce fashion retail platform
  • Siemens Healthineers [SMMNY] – a medical services, products and solutions provider
  • Symrise [SY1G.DE] – a producer of flavours and fragrances
  • HelloFresh [HFG.DE] – a meal kit provider
  • Sartorius [SRT.F] – a pharmaceutical and laboratory equipment supplier
  • Porsche Automobil [PSHG_P.DE] – an automobile manufacturer specialising in high-performance sports cars
  • Brenntag [BNRGn.DE] – a chemical distribution company
  • Puma [PUM.DE] – a multinational corporation designing and manufacturing athletic and casual footwear, apparel and accessories
  • Qiagen [QIA.DE] – a provider of sample and assay technologies for molecular diagnostics

Interestingly, trading volume will no longer be the main criterion for ranking. Instead, as well as demonstrating market capitalisation credentials, companies entering the DAX40 (DE40) need to have been profitable for the last two years before their admission. Another requirement is positive EBITDA in the two most recent annual financial statements of the companies. Then, companies will need to submit annual financial statements and quarterly reports on time following their access.  

How might the DAX30 reform impact traders?

The new DAX will be a better reflection of corporate Germany, focused mainly on growth, meaning the dynamic of the index may change. More stocks will lead to higher trading volumes and, eventually, more liquidity.

 

More stocks also means higher diversification, although the big companies will still have the highest impact, so any change at the top of the index won’t be significant. On the other hand, big companies with considerable index weighting may influence the DAX’s moves less.

 

The reform will also mean that the MDAX will lose the companies that represent almost half of its market capitalisation. This would potentially lead to reduced liquidity.

 

In a press release, Stephan Flaegel, Chief Product Officer, Indices and Benchmarks at Qontigo, said:

 

We are completing the biggest DAX reform in our history, manifesting the DAX as the German Blue Chip index, which will represent a larger spectrum of the German capital market. The qualitative improvements and alignment with international standards are largely owed to feedback from market participants. Together, we have put the DAX index family in the best possible position for the future.”

 

To practise trading on the DAX index plus all the new DAX arrivals as stock CFDs, open an account and start your Eurotrader journey today.

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What is the September Effect?

The September effect is a market anomaly where traditionally, stock markets underperform, and share prices end up lower on average.

 

Excluding the New Year period, September is by far linked to the biggest number of clichés when it comes to resolutions: September is a time for a change, September is the best time to start a new routine, to buy a car, to get a gym membership.

 

It probably has something to do with the after-holiday psychology. Once we charge our batteries and clear our heads, we feel ready to move forward. Yet, September is also linked to high costs, such as schooling and that gym membership we mentioned earlier. It also means less free time as we are trying to put our decisions into effect. 

 

All the above are considered to create the so-called ‘September Effect’ in markets. However, the September Effect is more of a pattern than it is a phenomenon. 

 

Market analysts have observed that the stock market’s three leading indices (S&P 500, Dow Jones Industrial Average (DJIA) and Nasdaq Composite) typically perform poorest during September. What’s more, data analysis has shown that global share prices have fallen in more than half of the last Septembers.   

 

However, many traders question whether the September effect is real or just an urban financial legend. As with many other calendar effects (any market anomaly or seasonal behaviours), the causal relationship is difficult to verify. 

What is the September Effect?

“Remember, remember the effects of September”

The September Effect is associated with equity markets worldwide, while analysts attribute it to seasonal behavioural bias. 

 

For many people, September usually means a smaller budget (those £15 Tiki cocktails on your summer holiday may or may not be responsible for burning a hole in your pocket). However, the effect is felt not only with smaller budget traders but big funds too.

 

For example, investors often switch up their portfolios at the end of summer to cash in. During the summer months, the traded volumes are thinner as many investors usually refrain from actively trading. Once they return to work, they return to trading. As a result, the market experiences increased selling pressure and, therefore, an overall decline.

 

Also, many mutual funds cash in their holdings to harvest tax losses as they experience their fiscal year-end in September. Interestingly, there appears to be no particular market events or news contributing to this market anomaly.  

 

Since their establishment, the DJIA has declined by 0.8% on average in Septembers, the S&P 500 by 0.5%, and the Nasdaq also by 0.5%.

 

As it doesn’t happen every single year, the September Effect must not be used to predict the market movement. Besides, traders should focus on more than just seasonal patterns to make predictions and test their strategies. 

 

However, traders might find the September Effect an exciting opportunity to watch the S&P 500, Nasdaq 100 and DJIA. Our guide, Indices trading, explained, is the perfect starting point to get started with the market. 

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A history of Bitcoin’s ups and downs

If you are a huge pizza fan, you already know that you can celebrate with your cheese-pepperoni doughy friend twice a year! “Twice?” you ask. “How’s that?”

 

Well, as well as Pizza Day (9th February), where foodies worldwide glorify the Italian delicacy, May 22nd is celebrated as Bitcoin Pizza Day. You see, on this day in 2010, a programmer from Florida successfully traded 10,000 bitcoins for two Papa John’s Pizzas.

 

Fast-forward to the future, Bitcoin (or BTC) is the world’s first-born digital currency. Launched in 2009, it has paved the way for the crypto (r)evolution. However, there is still a cloak of secrecy over the identity of its creator(s), Satoshi Nakamoto (most likely a pseudonym). 

 

Today, Bitcoin is the most popular cryptocurrency. In many countries and online, you can use Bitcoin to buy products and services as you would with traditional currencies.

 

By design, Bitcoin’s supply limit is $21 million, meaning the currency cannot be devalued in the same way a conventional currency can. Bitcoin has asserted its dominance over other cryptocurrencies, collectively named altcoins (i.e., bitcoin alternatives).

 

Cryptocurrencies are highly volatile as they are backed by peer-to-peer technology and not controlled by any central authority, government or organisation. As a result, almost anything can move their price.  

A history of Bitcoin's ups and downs

So what causes Bitcoin's rise and falls?

A series of unfortunate events can cause a huge crash for Bitcoin’s price. But, also, a series of fortunate events can make it soar. Let’s explore some of the events fuelling Bitcoin’s ups and downs. 

 

Supply and demand

Cryptocurrencies are subject to cycles of high public interest, and when demand for crypto is high, its price dramatically increases. Bitcoin’s supply is limited, marking its deflationary character and providing one more reason for its growth.

 

Fiat crises

When conventional currencies face a crisis, cryptocurrencies come to the fore as they are decentralised – especially bitcoin. When investors lose interest in a fiat currency, they resort to bitcoin or its rivals, pushing up the price.

 

Regulation or market manipulation

Government bans, and even regulation or taxation discussions over cryptocurrencies, decrease their value. Restrictions make potential buyers considerably reluctant to buy, and thus the demand goes down.

 

Crisis of confidence due to bad publicity

Cryptocurrencies’ prices are sensitive to both good and bad news, mainly because they are not regulated. Media plays a massive part in people’s perception of crypto – any story about a real-world application that goes viral drives Bitcoin’s price.

 

Security breaches

The digital and unregulated nature of cryptocurrencies makes them vulnerable to hackers. Each time a hackers’ attack occurs, it undermines the reliability of the cryptocurrency. For example, Bitcoin’s value dropped immediately and dramatically in 2014 when hackers attacked Mt. Gox (a Japanese BTC exchange) and stole plenty of coins. 

 

A timeline of Bitcoin’s peaks of fame (not so glorious days included as well)

2008 – A white paper called Bitcoin – A Peer to Peer Electronic Cash System was posted under the name Satoshi Nakamoto, describing how Bitcoin would work.

 

2009 – The Bitcoin software is made available to the public for the first time. Mining – the process by which new bitcoins are created and entered into circulation – begins too.

 

2010 – Bitcoin is valued for the first time: two pizzas for 10,000 BTC (reminder for pizza lovers: you can celebrate Bitcoin Pizza Day on May 22nd!). This purchase is the first known bitcoin transaction offline and in the real world. Following its popularisation, its first correction takes place. It lasted more than 23 days. 

 

2011 – Altcoins emerge as the logical consequence of Bitcoin’s popularity. Today, there are over 4,000 cryptocurrencies in circulation, with new ones frequently appearing among dedicated communities of backers and investors. 

 

April 2011 Time and Forbes discuss Bitcoin for the first time, and its popularity grows. In June, a little bit later, Bitcoin’s price jumped from $1 in April to a peak of $32, a gain of 3,200%.

 

2013 – While at the end of 2013, the US Senate had recognised Bitcoin’s potential, China started to impose restrictions on its use. Shortly after reaching $1,000 per Bitcoin for the first time, the price soon began to decline and finally crashed by 87%. 

 

2014 – The world’s largest Bitcoin exchange, Mt.Gox, went offline, and 850,000 Bitcoins disappeared. It was one of the biggest hacks in the history of Bitcoin. 

 

2016 – There are trends towards a revival of the crypto industry following Bitcoin’s correction in 2015. 

 

2017 – Bitcoin grows 1950% from $974 to $20,000. Its growth was credited to its continued growth in popularity and the emergence of more and more uses. Banks began to investigate ways they might be able to work with Bitcoin. 

 

2018 – Oh my! A terrible year for Bitcoin. From an all-time high (ATH), Bitcoin lost 83% of its value. Its price moved sideways for the next two years.

 

2020 – The world economy shuts down due to the pandemic, and Bitcoin comes back to life – a total recall. Bitcoin’s price reached just under $24,000 (a record price) in December 2020, increasing by 224% from the start of 2020 when it was $7,200.

 

2021 – Bitcoin had its best day in April when it smashed all previous price records and reached more than $64,000. 

 

We’re guessing that now, you might have an appetite for high volatility and speculative trading? Great! We’re here to support you and empower you to trade up. If you need some more information on how to trade cryptocurrencies, our intro to crypto trading is an excellent place to start. 

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What are the 11 stock market sectors today?

While searching for the best title for this blog, we decided to add the word today. Why? Because the stock market sectors are revised from time to time in keeping with market trends. If this blog post were written back in 2015, the stock market sectors would be only 10. The real estate sector was the new entry in 2016 when the need for a separate sector was identified. 

 

Let’s look at why the stock market is broken down into sectors by defining what a stock market sector actually is. Stock market sectors are broader than industries. In particular, a stock market sector is a set of companies with similar business activities in direct competition with each other. 

 

In general, we broadly classify businesses into three sectors: manufacturing, financial services and technology.

 

There are various classifications systems, with Industry Classification Benchmark (ICB) and Global Industry Classification Standard (GICS) being the most commonly used. GICS was developed in 1999 by the two leading index providers: Standard & Poor’s (S&P) and MSCI (formerly Morgan Stanley Capital International). Its alternative, ICB, was created in 2005 by Dow Jones & FTSE. 

 

The most popular of the two, GICS, is a classification system using codes to sort publicly traded companies into sectors based on their primary business activity. 

 

The 11 GICS sectors are further segmented into 24 industry groups, 69 industries and 158 sub-industries.  

What are the 11 stock market sectors today?

Understanding sector breakdown

There are various benefits and reasoning behind breaking the market down into sectors. In trading, the primary use of this breakdown is portfolio diversification. One of the top tips for choosing stocks is to pick an industry and then learn its leaders, trends and strengths.

 

In the decision-making process, it’s essential to know each company’s business model when exploring growth prospects. Classification facilitates comparing companies with similar activities and, subsequently, the allocation of funds within a portfolio. 

 

Not only that, it allows detailed reporting and stock monitoring while making it easier to keep out undesirable industries.  

 

However, you mustn’t get too tied to the classification. Sometimes, larger companies are active in multiple industries. So, make sure you’re always looking at the bigger picture of what a company does and consider its stage in the business cycle.

 

Moreover, keep in mind that various market sectors may be affected differently by volatility. Also, look beyond size, and consider how well one sector performs against another.

 

The 11 GICS stock markets sectors and their 69 industries
  • Informational Technologies (6): IT Services, Software, Communications Equipment, Technology Hardware, Storage & Peripherals, Electronic Equipment, Instruments & Components and Semiconductors & Semiconductor Equipment.

Stand-out stocks*: Hp Inc [US] (NYSE:HPQ.N), Zoom Video Communications Inc [US] (NAS:ZM.O), Intel Corp [US] (NAS:INTC.O)

 

  • Healthcare (6): Health Care Equipment & Supplies, Health Care Providers & Services, Health Care Technology,  Biotechnology, Pharmaceuticals and Life Sciences Tools & Services.

Stand-out stocks*: Moderna Inc [US] (NAS:MRNA.O), Sanofi [France] (PAR:SASY.PA), Danaher Corp [US] (NYSE:DHR.N)

 

  • Financials (7): Banks, Thrifts & Mortgage Finance, Diversified Financial Services, Consumer Finance, Capital Markets and Mortgage Real Estate Investment Trusts (REITs).

Stand-out stocks*: JPMorgan Chase & Co [US] (NYSE:JPM.N), Paypal Holdings Inc [US] (NAS:PYPL.O), Berkshire Hathaway Inc [US] (NYSE:BRKB.N)

 

  • Consumer Discretionary (11): Auto Components, Automobiles, Household Durables, Leisure Products, Textiles, Apparel & Luxury Goods, Hotels, Restaurants & Leisure, Diversified Consumer Services, Distributors, Internet & Direct Marketing Retail, Multiline Retail and Specialty Retail.

Stand-out stocks*: Nike Inc [US] (NYSE:NKE.N), Starbucks Corp [US] (NAS:SBUX.O), McDonald’S Corp [US] (NYSE:MCD.N)

 

  • Communication Services (5): Diversified Telecommunication Services, Wireless Telecommunication Services, Media, Entertainment and Interactive Media & Services. 

Stand-out stocks*: Netflix Inc [US] (NAS:NFLX.O), T-Mobile Ltd [US] (NAS:TMUS.O), Facebook Inc [US] (NAS:FB.O)

 

  • Industrials (14): Aerospace & Defense,  Building Products, Construction & Engineering, Electrical Equipment, Industrial Conglomerates, Machinery, Trading Companies & Distributors, Commercial Services & Supplies, Professional Services, Air Freight & Logistics, Airlines, Marine, Road & Rail and Transportation Infrastructure. 

Stand-out stocks*: Fedex Corp [US] (NYSE:FDX.N), 3M Co [US] (NYSE:MMM.N), Caterpillar Inc [US] (NYSE:CAT.N)

 

  • Consumer Staples (6): Food & Staples Retailing, Beverages, Food Products, Tobacco, Household Products and Personal Products.

Stand-out stocks*: Target Corp [US] (NYSE:TGT.N), Procter & Gamble Co [US] (NYSE:PG.N), Estee Lauder Cos Inc [US] (NYSE:EL.N)

 

  • Energy (2): Energy Equipment & Services and Oil, Gas & Consumable Fuels.

Stand-out stocks*: Exxon Mobil Corp [US] (NYSE:XOM.N), Chevron Corp [US] (NYSE:CVX.N), BP Plc [UK] (LSE:BP.L)

 

  • Utilities (5): Electric Utilities, Gas Utilities, Multi-Utilities, Water Utilities and Independent Power and Renewable Electricity Producers.

Stand-out stocks*: Evergy Inc [US] (NYSE:EVRG.N), NextEra Energy Inc [US] (NYSE:NEE.N), American Water Works Co Inc [US] (NYSE:AWK.N)

 

  • Real Estate (2): Equity Real Estate Investment Trusts (REITs) and Real Estate Management & Development.

Stand-out stocks*: Welltower Inc [US] (NYSE:WELL.N), American Tower Corp [US] (NYSE:AMT.N), Digital Realty Trust Inc [US] (NYSE:DLR.N)

 

  • Materials (5): Chemicals, Construction Materials, Containers & Packaging, Metals & Mining, Paper & Forest Products.

Stand-out stocks*: Rio Tinto Plc [UK] (LSE:RIO.L), Linde PLC [Germany] (ETR:LINI.DE), International Paper Co [US] (NYSE:IP.N)

 

*Per Market Cap

 

We’re guessing that now you might want to build a diversified portfolio to trade, including stocks from different sectors? Find your perfect match by choosing from our tens of thousands of stock CFDs

Trade across five asset classes and enjoy Eurotrader’s competitive spreads and fast execution in every market. Over 2,000 instruments in forex, cryptocurrencies, stocks, commodities, and indices are ready for you when you are.

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Why and when should you rebalance your portfolio?

Imagine you are at your favourite ice cream parlour, and you have to choose scoops of ice cream that will accompany your crispy cone. You want them all. But how many scoops can balance on the cone? Although there is evidence that you could stuff about 21 scoops (we’ve tested that for you), it doesn’t mean you should. Why? Because all your scoops will begin to melt and be challenging to maintain. Instead, they will end up on your t-shirt, and you will end up dirty and broken-hearted. 

 

The same applies to your trading portfolio. Building and maintaining a portfolio is not an easy task, as it involves research, targeting and decision-making. One of the main aspects of portfolio management is reducing the risk involved in trading (therefore allowing you to enjoy trading a bit more, too!). 

 

Portfolio rebalancing is one of the portfolio management procedures where risk mitigation is achieved through the reallocation of the trading assets.

 

By rebalancing your portfolio, you can keep the desired level of risk and control in a better way your emotions, for example, when volatility keeps you up at night. 

 

To enjoy both a good night’s sleep and your trading activity, line up your investment with your goals and rebalance your portfolio from time to time. 

 

When you rebalance your portfolio as a trader, it means that you have to: 

  • Firstly, ensure that your portfolio isn’t dependent on the success or failure of a particular asset class or fund type.
  • Mix various assets as per your trading style, goals and money you can afford to lose, i.e. your risk tolerance.  
  • Add and remove assets in your basket or allocate additional funds to specific assets you are already trading. 

Why and when should you rebalance your portfolio?

“Balance is not something you find. It’s something you create.”

When is the right time to rebalance my portfolio? 

 

While there is no standard schedule for rebalancing a portfolio, experts recommend examining allocations quarterly or at least once a year. Then, of course, you may restore the balance only when you feel that the allocations are significantly off track. 

 

Another strategy, apart from reviewing the portfolio in predetermined time intervals, is to check it whenever the trading conditions change or your portfolio has become unbalanced. For example, if your risk tolerance or investment strategies have changed, the time to reshuffle the cards has come.  

 

As stock performance can vary dramatically, the percentage of assets associated with stocks will change with market conditions. Therefore, when the market moves significantly, you may need to rebalance the weights to match your target asset allocation. A quick reminder: past performance is not always an indication of future performance. 

 

The same applies when the stock percentage of your portfolio has grown considerably in value. Depending on market performance, you may find a large number of current assets held within one area.

 

Another case is when your financial needs have changed. Then, you may adjust the overall risk to meet such changing financial needs along with the performance variable. Another right timing for rebalancing your portfolio is when you can sell high and buy low. 

 

We’re guessing that now you might want to check new assets to rearrange your portfolio. How about exploring Eurotrader’s instruments and spreads? Trade across five asset classes and enjoy Eurotrader’s competitive spreads and fast execution in every market. We’ve got over 2,000 instruments in forex, cryptocurrencies, stocks, commodities and indices that are ready when you are.