Equipping clients for opportunities

With the prolonged bull run in equities, bonds and commodities giving way to volatility, fear and uncertainty, sure-fire investment gains are off the table and a new investment landscape is emerging.

Sharp changes in prices create opportunities for astute investors to realise gains, especially if they use derivative tools to both leverage their positions and reduce risk.

The market’s volatility is being driven by a range of factors, notably speculation about the direction of interest rates and inflation, and the Ukraine conflict, which has sparked the worst energy crisis since the 1970s.

“We are now entering a new age of trading,” says Bryn Newell, chief technology officer at Eightcap, an Australian-based derivatives broker founded in 2009.

“It was an easy ride for investors over the last five years, with cheap capital and funds pouring in from venture capital. The ‘long’ exposures were profitable for investors, but with the bull run coming to an end, new market trading strategies are being adopted to generate alpha (excess returns relative to a benchmark).”

Amid the uncertainty, Eightcap reports a surge of interest from derivative traders wanting to make the most out of falling prices by speculating on the market.

“When things aren’t as predictable in the market due to increased volatility, it allows traders to become much more creative with how they trade and what they trade,” Newell says.

“In addition to an increase in trade volumes from our incumbent retail clients, our customer base has rapidly grown by the thousands in the past quarter.”

The broker is known for its industry-leading cryptocurrency derivatives, offering retail traders more than 300 products to add to their portfolio. Other instruments include foreign exchange, indices, commodities and stock contracts for difference (CFDs).

The key advantage of CFDs is that traders can benefit from price fluctuations without tying up capital by owning the underlying asset.

Newell notes particular interest in cryptocurrencies in the wake of the sector’s recent sell-off, as well as oil-linked derivatives. The age-old store of value, gold, also has enduring appeal.

“Commodity interest has blown out of the water during the recent market collapse and it is not surprising, given the current macroeconomic factors such as inflation and increased economic sanctions.”

Newell stresses the importance of spreading and managing risks in periods of high volatility. An example of this is hedging: A trader might be ‘long’ on gold but also ‘short’ the derivative position as insurance against a sharp fall.

Eightcap competes on the three key pillars of price, investor education and technology to enable seamless trading.

“We have ultra-low spreads,” Newell says. “We don’t want the cost of trading to be a barrier to entry for new investors and this assists them. It also helps with customer retention.”

He cites the $8-$12 cost of trading a bitcoin contract with Eightcap (depending on market conditions). “This is on average 500 per cent cheaper than other derivatives providers, and 1000 per cent cheaper than mainstream crypto exchange derivatives trading.”

Furthermore, Eightcap provides key market insights from its trading experts to both new and well-seasoned traders via Trade Zone, an initiative that provides traders with a mix of webinars and market updates delivered straight to their inbox.

“They are gaining a perspective across the different financial instruments, and ideally picking up trade tips that they have not even considered before,” Newell says.

Eightcap clients have the choice of the Metatrader 4 (MT4) and Metatrader 5 (MT5) platforms, which are the market-leading trading platforms within the industry.

The award-winning broker has also recently integrated TradingView, adding to its extensive stock of tools.

“TradingView is the tool for a new generation of traders, with 30 million monthly users,” Newell says. “Clients can trade directly off the charts, connect with the community on trading strategies, create custom formulas and timeframe and use the pre-built indicators. It’s a massive self-education play as well.”

For well-seasoned Eightcap traders, there is also the opportunity to automate trading strategies with TradingView’s Pine Script programming language.

Given the nature of the market and its bouts of increased volatility, great tools and resources are crucial for every trader – and Eightcap does not fall short in this respect.

For example, via Eightcap newer entrants to financial markets have access to Capitalise.ai, which allows them to automate their trades.

Of course, platform stability and security are paramount when trading derivatives and Eightcap has partnered with Amazon Web Services and US cybersecurity giant CrowdStrike to protect its infrastructure and customer information.

“Traders are looking for tools, insights, pricing, technology when it comes to finding their next market opportunity, overlaid with sound regulation,” Newell says.

“At Eightcap, this is at the heart of what we do: ensuring that we are constantly supporting and exciting our clients and ensuring they are well-equipped for trading financial markets.”