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Retail trading is changing: what CMC Markets found out when it talked to UK traders

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A new report out from CFD broker CMC Markets has found that for 24% of retail traders, trading is not just a hobby – it’s a strategy to earn enough money to quit their current job. The report offers evidence that the stereotype of the traditional trader is outdated, with individuals from various demographics entering the retail trading market in recent months and years.

The report is based on an independent survey of over 500 UK retail traders spread across different backgrounds and demographics.

What is changing retail trading?

CMC Markets said it is clear that rising social influences, major macroeconomic challenges, and new technologies are all combining to dramatically alter the retail trading landscape.

The majority of retail traders surveyed (69%) started trading within the last two years or during the pandemic (28%), reflecting the recent surge in trading popularity.

The report also found that influencers hold an incredible sway over today’s retail trader, even more so than family for a third of respondents.

Efforts by brokers to employ influencers to reach more customers is becoming more dangerous however, with regulators now paying more attention to the way influencers have been promoting digital assets for example. The CEO at a conference attended by The Armchair Trader recently, confessed his firm had switched tactics, dropping the influencer strategy, “because of regulatory issues.”

Many traders have a US-centric attitude, following companies like Amazon NASDAQ:AMZN, Netflix NASDAQ:NFLX and Apple NASDAQ:AAPL and with 45% trading most around US markets open and close. This is reflected in the huge volumes in Magnificent 7 stocks, the disproportionate valuations on the shares of tech giants, and the increasing concentration risk they now represent.

Shorting IPOs running into trouble is a strategy for almost 50% of retail traders, while over half (57%) will trade more if central banks pause or even cut interest rate hikes.

Traders are also excited about AI, with the majority (59%) likely to try out AI trading tools.

Trading is no longer just a hobby

Today’s retail traders want to turn trading into their main income: while a quarter (24%) of retail traders started trading to quit their day job, 46% started trading to build on their current income levels, while a further 31% wanted to make better use of their savings. It’s ‘just a hobby’ for less than 30% of retail traders.

Trading is already a key source of income for many: almost a third of retail traders said that trading is responsible for 11 – 20% of their income, while almost a quarter claimed they get 21 – 30% of their income from trading.

What is influencing today’s retail traders?

Digital technologies have transformed the trading landscape: Half of retail traders prefer mobile apps to trade with, yet this is closely followed by online websites (47%). Offline brokers are a thing of the past, and traders primarily obtain market information through influencers instead, with almost 60% more likely to trade when an influencer flags an opportunity.

Influencers drive trading decisions: while family is the second biggest influence on retail traders, 33% would listen to advice of popular traders and influencers above family members. The most popular traders are Trader Tom in the UK, and Peter Robbins internationally.

The UK vs US: what and where are traders prioritising?

Many of the stocks and IPOs that interest traders are US-based: 45% of retail traders are more likely to trade around US market opening and closing. What’s more, Amazon was cited as the most watched company (43%), closely followed by Netflix at 38% and Apple at 32%.

High earners are more interested in Nasdaq: while FTSE100 companies are still of great interest to 34% of traders, 54% of the wealthiest group of retail traders were more interested in Nasdaq 100 companies than any other market.


Retail traders’ approach to risk

Traders are attracted to an unpredictable, erratic market: 48% of traders agree that they tend to trade when there is high volatility in the market. Many (57%) are also looking to trade more if central banks pause or even cut interest rate hikes this year.

Risk mitigation strategies vary: the most popular strategy for mitigating risk is to properly manage emotions – cited by 35% of retail traders. Other popular strategies include diversifying portfolios and determining exposure beforehand.

The future of retail trading

AI is likely to become the next trading disruptor: 59% of retail traders are likely to utilise AI tools. Only 4% said they would be very unlikely to engage with AI, with older retail traders the most sceptical of AI technology.

“Retail trading has taken a very different shape to where it was five years ago. The pandemic opened the door to a whole new demographic of traders,” said Jochen Stanzl, Chief Market Analyst at CMC Markets. “Today, as the data shows, retail trading is so much more than a hobby. And most traders are taking advantage of a highly volatile market, following economic calendars to inform their strategy, and managing their emotions well to mitigate risk. For 2024, we found that shorting IPOs will be a priority, as will closely monitoring interest rate changes and major US companies during earnings season. With AI around the corner, retail trading is set to transform even further.”

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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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