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Do you still believe in the Santa Claus rally?

Many people think that Santa Claus does not exist because no one has ever spotted him. However, a seasonal rally that has been observed during the festivities has got some traders and investors believing in the Christmas magic.

The so-called Santa Claus rally is a historical pattern related to a year-end stock rally. The term was invented in the early 1970s by a market analyst who noticed the pattern.

While it’s not guaranteed, stocks tend to rally during the final five trading sessions of the year. The same occurs in the first two trading days of the new year as well. 

Historically, this market phenomenon has frequently delivered positive returns and a rise in stock prices. But, as with all seasonal effects, there is no guarantee that investors will see gains in any particular year. Past results cannot prove future performance, although data suggest that Santa rallies happen more often than not.

Eurotrader blog post | Do you still believe in Santa Claus rally

“Forget Christmas socks. What about stocks?”

What drives the Secret Santa rally? (No, it’s not reindeers.)

 

Many analysts believe that the Santa Claus rally results from people buying stocks in anticipation of the January rise in stock prices.

 

Other factors that may trigger the Santa rally are new year’s optimism or even the profiteering from holiday bonuses. 

 

Investors might also look at the consumer goods sector, which often gets a boost from holiday shopping. (Historically, strong stock markets have correlated with increased spending on goods.)

 

This year, the sentiment could be positive among traders based on optimism that the new year may be the last for the pandemic. However, the latest variant, Omicron, has also brought with it some concern and pessimism.

 

So there we have it. Stocks might go up, but they also might go down (as with any other time of year!). One way to tap into both directions is to trade CFDs, which allows you to speculate on upwards and downwards market movements.

 

Santa Claus visited Eurotrader early this year and dropped off a bunch of new assets! How about giving a boost to your trading portfolio by speculating the prices of our new commodities and indices

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How to choose the right trading bonus for you

‘Hooray’! This is the word used to express traders’ joy when they find out that their favourite broker is offering a new bonus. 

 

A trading bonus is an opportunity for traders to receive extra funds to trade, and/or some other rewards too. 

 

As you may have already seen, there are several types of bonuses: deposit bonuses, no-deposit bonuses, welcome bonuses, and others with fancier and more imaginative names. 

Before you decide which bonus you’d like to claim, you’d better get an idea of how each one works and what you can achieve. 

 

Although there are various differences between trading bonuses and promotions, there is one common truth behind them: if you use them wisely and responsibly, they can benefit you. You should also bear in mind that there are specific requirements (minimum deposit, minimum trading volume etc.) that you might need to meet to get/use your bonus.

 

The advantage of bonuses, especially for new traders, is that even when your trading budget is minimal, you have the potential to receive some extra money to boost your trading activity. The same applies to experienced traders in that bonuses will give them the opportunity to trade larger amounts of capital.

Different traders, different needs, different types of bonuses

Let’s recap on the three main types of bonuses: 

 

Deposit bonus: You can claim this bonus either with your first deposit or with every deposit you make, depending on the offers. Deposit bonuses are beneficial for traders since once the bonus is unlocked, they can trade bigger sizes and more assets. In general, brokers offer 100% or less for deposit bonuses, but some (such as Eurotrader) might more-than-double your deposit

 

No-deposit bonus: The no-deposit bonus doesn’t require the trader to deposit any funds. As there is no risk of losing your own money, the worst-case scenario is losing your bonus. But the best case is that you can successfully trade your bonus and make profits out of it (though it’s worth noting that you usually have to trade a specified total volume before you can withdraw such profits). A no-deposit bonus is great if you want to try different trading strategies or even the broker of your choice and their trading conditions. 

 

Welcome bonus: Usually, the welcome bonus is what its name suggests: a complimentary welcome treat, like a fruit basket waiting for you at a Mediterranean coast hotel. This kind of bonus is usually transferred to the trader’s account following the registration and verification process. Sometimes you can get it automatically (like a no-deposit bonus), or you should first make a minimum first deposit (deposit bonus). The welcome bonus is usually a one-off, fixed sum equal for all new clients.

 

An important note is that you should always check the terms and conditions of each bonus to be sure that the one you chose is right for you, your trading experience level and your strategy.  

 

Speaking of bonuses, why not check out Eurotrader’s 111% deposit bonus? Just deposit between $50 to $20k to trade forex and metals, and we’ll match it by 111%. Promotion T&Cs apply.

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How does Black Friday affect stock markets?

Black Friday is hailed as the kickoff to the holiday shopping season, and it’s one of the busiest, if not manic, shopping days of the year.

 

But where does the term ‘Black Friday’ come from? Well, once upon a time, Black Friday used to refer to stock market crashes in the 1800s. Since then, and thanks to the madness around the day’s special deals, stocks (mainly retail and consumer) usually get a boost from the prominent retail event. 

 

The market movement around Black Friday is closely linked to a sharp rise in Black Friday retail sales. This is because consumers often follow up Thanksgiving by shopping for Black Friday sales. 

 

Therefore, this period is often seen as a consumer ‘sentiment indicator’. If retailers show strong numbers, investors might believe that this is the start of a robust shopping season. Therefore, they push stock prices up. 

 

Respectively, if retailers cannot satisfy consumers on Black Friday, investor confidence could plunge, possibly causing stock prices to drop.

 

As supply chain ‘disasters’ worsen, it’s expected to be a very strong holiday season. Some experts are even predicting a record-high shopping period. Thus, considering the limited availability, consumers will likely spend as much as they can now to get what they need before any rise in prices. 

 

Further shifts in the market may be seen due to the ‘holiday effect’, i.e., seasonal investor optimism.

How does Black Friday affect stock markets?

‘Happy Black Friday! May your lines be short and your tempers too :).’

The stock market sees movement around this time of year mainly due to the aforementioned holiday effect. Markets tend to see boosted trading volume and more significant returns the day before a holiday or long weekend.

 

Apart from the holiday spirit, which boosts investors’ optimism, there is another reason for the holiday effect. Investors get in their last trades before the stock market closes for the week. As a result, US stock markets are closed for half the day on Black Friday.

 

However, the Black Friday effects are usually short-lived. 

 

Investors sometimes turn to Black Friday sales numbers as an indication of a specific retailer’s health or even the overall state of the retail sector. 

 

However, there is no empirical data or scientific evidence to support this theory. Data hints that there is no connection between a stock’s Q4 performance and the company’s Black Friday sales.

 

So, the best practice is to consider a company’s overall health when deciding which stocks you will trade.

 

How about speculating on the future movements of retail stocks by trading them as CFDs before or after your Black Friday shopping? Check out our product page to find all our stocks, commodities, indices, cryptos and forex pairs!

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Elon Musk unmasks social media influence on markets once again

Elon Musk’s name caught the headlines during this past week for all the wrong reasons. 

 

The first time around, it was because of the news that astronauts on his SpaceX will have to wear nappies when returning to earth following toilet leakage issues. What a stroke of luck to have travelled to space, and everyone is asking you about diapers! 

 

Then, he asked in a Twitter poll whether he should sell 10% of his stake in Tesla [TSLA.O : NAS], to which 58% of the 3.5 million accounts that voted said he should. The eccentric billionaire has since sold about $5bn in shares amounting to roughly 3% of his Tesla holdings, just days after polling Twitter users. However, $1.1bn was already in train before the poll since last September. 

Documents showed that the sale of about a fifth of the shares was made based on a pre-arranged trading plan. 

 

Tesla is the world’s most valuable carmaker, with a stock market valuation of more than $1tn. The company’s shares fell by around 16% in the two days after the poll in a multi-day selloff that threatened the company’s position in the $1tn club. Tesla stock regained some ground of 4.3% on Wednesday.

 

While Tesla has lost close to $150bn in market value this week, retail investors have been net buyers of the stock.

 

Tesla is now up more than 51% in 2021, thanks largely to an October rally fuelled by an agreement with rental car company Hertz.

Elon Musk unmasks social media influence on markets once again

Social media & financial markets – A soulmate relationship

This is not the first time that Elon Musk has used social media in a way that looks like market manipulation. 

 

Elon Musk’s tweets moved markets twice this year. First, in January, Bitcoin’s value jumped more than 20% after he changed his personal Twitter bio to #bitcoin.

 

Also, in January, the Tesla and SpaceX CEO fueled the frenzied surge in GameStop shares when he tweeted “Gamestonk!!”. The made-up word is a combination of GameStop and “stonks,” a slang term for stocks.

 

Some investors are calling on regulators to get involved. In addition, a discussion has started on the legitimacy of the practice and if it is legal to enrich himself with one tweet.

 

It seems that financial markets have their own influencers, like the beauty and fashion industry. Likewise, social media influencers have encouraged retail investors to jump into meme stocks such as AMC and GameStop and specific cryptocurrencies, pushing prices beyond fundamental values.

 

The Federal Reserve reported the trading action of such stocks and decided that social media had driven risk appetites in equity markets.

 

Social media has forced the financial world to evolve as users realise that such platforms can affect market activity. On the one hand, information sharing and discussion may improve market efficiency and transparency. But, on the other hand, there is always the risk that malicious actors may manipulate markets and price formation through misinformation and disruption.

 

How about speculating on the future movements of meme stocks or cryptos by trading them as CFDs? Check out our product page to find all the mentioned companies and more!

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Chip stocks to watch amid a global shortage

It’s around this time of year that kids, nephews, nieces and grandchildren launch into exploratory talks of holiday gifts. Well, here’s a tip for you ahead of Christmas 2021: don’t mention anything about video game consoles, and if the kids do, you’d better divert to something even flashier to distract them. Why? Among hundreds of other products, the supply of gaming devices will be short since the manufacturers are out of chips.

 

The global semiconductor shortage began in 2018 as one of the knock-on effects of the US-China trade war, only to be exacerbated further by the rise of 5G and the need for infrastructure. The shortage was then escalated in 2020 due to the COVID-19 pandemic. With the demand continuing to outpace supply,  analysts now expect the shortage to last until 2023.

 

Over 100 industries are currently affected by the chip shortage, but four chip-heavy sectors were hit particularly hard: automotive, consumer electronics, appliances and LED lighting. As a result, many manufacturers have had to halt or cut back their production temporarily. 

 

The ‘chipageddon’ – as insiders call it – directly affects (lost) sales, (extended) waiting times for new purchases, (limited) supply and (higher) pricing.

Chip stocks to watch amid a global shortage - Eurotrader blog

In the midst of every crisis lies great opportunity

Heavily chip-reliant companies that can’t easily raise prices will be among the losers. The same goes for chipmakers who cannot invest in additional semiconductor equipment and struggle to meet demand.

 

But, are there any winners? A lot of chip stocks are performing well despite the shortage, mostly those outgrowing their competitors. Furthermore, chip-buying companies which can raise prices to compensate for lost sales may mitigate the effect. The biggest winners are likely to be the most commodity-like chipmakers and, obviously, the semiconductor equipment manufacturers. 

 

Nvidia Corp. (NVDA.O: NAS) is a leader in processors for personal computers, workstations and mobile electronic devices. Nvidia is outgrowing its peers, thanks in part to its data centre business. In 2021, Nvidia stock is on fire. By 2 November, the stock had returned 102% and jumped 23.4% in October. 

 

ASML Holding NV (ASML: AMS) is the world’s third-largest semiconductor equipment supplier. It’s also the only maker of extreme ultraviolet lithography technology used to print advanced chips. ASML stock trades at a lofty 45 times earnings. The chipmaker’s customers expand capacity to meet demand, a bullish near-term catalyst for ASML.

 

Advanced Micro Devices Inc (AMD.O: NAS) is a microprocessor and graphics semiconductor company. Its shares have been up more than 1,700% in the past five years. AMD will likely continue to gain share from its competitor Intel in the central processing unit data centre market and is overall a strong performer in the industry. On average, AMD’s stocks score higher than 51% of the stock market. 

 

You can always speculate on the future movements of the chip stocks by trading them as CFDs. Check out our product page to find all the mentioned companies and more!

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Climate change stocks to watch ahead of COP26

What do Mumbai, Miami and the Maldives have in common? Due to rising sea levels, they are all at serious risk of being completely submerged in the coming decades. 

 

This Sunday 31 October, Glasgow will host the 2021 United Nations Climate Change Conference, also known as COP26.

 

As more people shift to more sustainability-conscious lifestyles, the pressure is mounting on political leaders to take immediate action. 

 

The growing interest in climate change has also trickled into the trading sphere, namely in the form of climate change and green energy stocks. These stocks might be challenging to trade, however, since the future trend is towards a more sustainable and greener world, now is the time to build momentum and get to know such green assets.

Paint your portfolio green with renewable energy stocks

Renewable energy (biomass, hydropower, wind energy, solar energy and geothermal power) and waste management are the primary green investment sectors. 

 

States and industries all over the world pursue decarbonisation plans while demand for clean energy increases. In the United States, renewable energy firms are also set to benefit from the Biden administration’s clean energy plan. 

 

Investments in clean energy confirm that the renewable energy industry is growing at a faster rate. However, because the market is still growing, the high competition is causing drastic swings in prices. 

 

Tesla [TSLA.O: NAS] is a game-changer when it comes to clean energy and innovation. Apart from being a prominent player in the automotive industry, Tesla has expanded its activities into renewable energy generation and storage solutions. The company has become the first clean energy company to attain a market valuation of $1 trillion.

 

Following a recent shift towards residential solar power, SunPower Corp [SPWR.O: NYS] is now leading the market in solar energy stocks. Wall Street is beginning to warm up to the critical solar sector as a whole, lifted by the green wave.

 

Another well-known company in the renewable energy industry is Nextera Energy Inc [NEE.N: NYS]. NextEra is the largest electric utility holding company by market capitalisation. It’s also the largest in the US in terms of retail electricity produced and sold with about 58 GW of generating capacity. What’s more, NextEra is the world’s largest producer of wind and solar energy.

 

If you want to go green with your portfolio, why not try trading climate change stock CFDs? Check out our product page to find all the mentioned companies and more!

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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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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.