Do-it-yourself traders adapt by shorting index markets and applying caution

LONDON, UK / ACCESSWIRE / October 19, 2022 / According to the Q3 2022 Pulse Report published by global retail trading and investing platform Capital.com, 39% of all trades on the platform were short in Q3, suggesting market sentiment remained in bearish territory in the last quarter as it did in Q2. The Pulse report tracks the trading patterns of retail investors across all markets it operates in. Over 6 million people have opened an account on Capital.com.

Piero Cingari, Market Specialist at Capital.com, said:

"Markets remained jittery for most of the last quarter and despite the summer's short-term bear market rally, traders remained bearish with the proportion of short positions near all-time highs. They made the right choice, because by mid-August, the Nasdaq 100 had fallen again."

Despite the bearish sentiment In Q3, traders sought to profit from shorting the index markets, which was the most shorted market on the capital.com platform during the quarter. The percentage of short trades on Italy's FTSE MIB reached an all-time high of 71% while the German DAX and the Nasdaq 100 showed 49% and 45% share of shorts, respectively.

"Our data shows how traders adapted their strategies amid a turbulent market environment. They continued to implement shorting strategies, which enabled them to attempt to profit from falling asset prices, and switched to markets where they could apply personal insight to help mitigate risk and uncover new opportunities."

Over the same period, traders exercised more caution with the average trading length for short positions staying within 9.6 hours - compared with the 44 hours for long positions. The longest-held index at 116 hours was the VIX, suggesting traders tried to benefit from the increase in market volatility during the period.

The data also shows that the use of stop-loss orders- a risk management tool to limit losses - was higher in Q3 with 12.3% of trades covered by a stop-loss order, up from 11% in April-June 2022.

"It is encouraging to see a rise in the use of stop-loss orders among retail traders. This could be particularly helpful if we enter a period of prolonged weakness in markets. Using sensible risk control measures such as stop losses in tandem with short-selling could be a prudent addition to a trader ‘s overall strategy," added Cingari.

Traders capitalise on Italian elections

During Q3, retail traders rushed to short the Italian index, the FTSE MIB. The share of short-position trades on the FTSE MIB reached an all-time high of 71% and coincided with a significant rise in profitability in Q3.

According to Capital.com data, FTSE MIB trades were most profitable in the week just before the elections, with 41% of trades achieving a profit. This is in contrast to its 2022 average, where 30% of FTSE MIB trades on the platform were profitable.

Traders turned more bullish when the new government led by Giorgia Meloni won the election with a clear majority. The percentage of short position trades dropped from 71% to 57% in the week immediately after the election.

"Although the Italian stock index - FTSE MIB - is a minor market in terms of volume and traders on our Capital.com platform, it is worth noting how traders became increasingly bearish and adopted more short-positions in the lead up to the Italian elections on 25 September. This again shows how retail traders were quick to respond to world events and switched to markets where they could capture potential event-driven opportunities," said Cingari.

The Pulse Report is a proprietary report published quarterly by Capital.com. The Q3 2022 Pulse Report captured data on all executed trades on the Capital.com platform globally between 1 July 2022 and 30 September 2022.

For additional trading data and retail investment trends, you can view the complete Pulse report here.

ENDS

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Notes to Editors

About Capital.com
Capital.com is a high-growth investment trading group of companies empowering people to participate in financial markets through secure, innovative platforms that take the complexity out of investing. Its intuitive award-winning platform, available on web and app, offers investors a seamless trading experience to over 6,000 world-renowned markets. To help investors trade with confidence, the platform is enabled with robust risk management controls and transparent pricing while its all-in-one Investmate app delivers extensive financial lessons and educational content to support clients in their investment journey.

Capital.com has a global network with offices located in the UK, Gibraltar, Singapore, Australia, and Cyprus. In 2021, the platform reported a 350 per cent growth in its client base, making it one of Europe's fastest growing investment trading platforms with more than 4 million registered users.

Capital Com (UK) Limited is authorised and regulated by the Financial Conduct Authority (FCA) under registration number 793714. Capital Com SV Investments Limited is Authorised and regulated by the Cyprus Securities and Exchange Commission (CySEC), under license number 319/17. Capital Com Australia Pty Ltd is authorised and regulated by the Australian Securities and Investments Commission (ASIC) under AFSL Number 513393.
To find out more, please visit: www.capital.com

SOURCE: Capital.com