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Day traders are relying on their research, not social media

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According to a recent survey by Capital.com, a European investment trading platform, 61% of its traders make decisions based on research and technical analysis. This is compared to 16% of clients who said their trading decisions are affected by social media influencers. A further 22.3% said the media is a strong influence when making trading decisions.

These findings, which were revealed as part of a survey of 1677 Capital.com clients polled between 14 and 20 June 2021, run contrary to the growing significance of social media influencers and ‘copy-cat trading’ on retail traders.

“Despite the rise of social media influencers in the retail trading space, our clients do not seem to be significantly swayed by them when it comes to making all-important trading decisions,” Jonathan Squires, Group Chief Executive Officer at Capital.com. “Instead, most traders on Capital.com prioritise greater education and independent research when it comes to making trading and investing decisions.”

The survey also found that most traders prefer to hold a position in stocks for a month or more, suggesting that retail investors are currently embracing a buy-and-hold strategy when it comes to investing in stocks.

There had been some concerns voiced by regulators and some brokers that investors were relying too heavily on influencers on social media for trade signals. While this might have been the case during the height of the GameStop frenzy, when new traders religiously followed Reddit for ideas, it now seems that many have learned their lesson.

Traders who entered the market for the first time in 2020 are also diversifying their sources of information.


How long do investors typically hold stocks?

When asked how long they would typically hold a stock position, 38% of survey respondents said a month or more while 28% said a week or more. This compares to just 16% who said they’d hold a position for two to three days, while a minority (10%) said they would hold a position for 24 hours or less.

Half of all respondents also said they usually select value stocks (50%) while 37.7% said they favour growth stocks. When asked if they had a preference for stocks based on market capitalisation, 27.6% said they would usually pick small-cap stocks while 25.9% favour mid-cap and 22.6% said they would typically select large cap stocks.

“Our data clearly demonstrate that retail investors are currently taking a longer-term view when it comes to stock investments. As more day-traders diversify their portfolio and turn to longer term investment strategies, retail platforms like ours must be quick to respond to changing investment patterns with a wide range of products and services. To enable our clients to diversify beyond derivatives trading and to allow them to take a more long-term investment view, we enabled commission-free stock dealing on Capital.com, ” added Squires.

Capital.com enables clients to trade derivatives on more than 3,000 of the world’s most popular markets through its web and mobile platforms. The platform recently launched commission-free stock dealing with tight spreads. With no hidden costs or mark-ups and with no fees to pay on deposits or withdrawals, clients can invest directly in an underlying stock without incurring any additional costs or expenses.

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This article does not constitute investment advice. Make sure you do your own research or consult a professional advisor.

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