Exploring Retail Trading Innovations: CMC Markets’ 2024 Industry Forecast

This report provides a detailed analysis of the current shifts within the retail trading industry, notably revealing that 24% of retail traders view trading not merely as a hobby but as a viable strategy to replace their existing employment. This finding is indicative of a significant change in the perception of trading, which now attracts a diverse array of participants from various demographics, challenging the conventional image of the traditional trader.

According to the report, a substantial portion of retail traders, approximately 69%, commenced their trading activities within the last two years, with 28% starting during the pandemic period. This surge in trading interest highlights a dynamic shift in market participation. Influencers are exerting a considerable impact on today’s retail traders, surpassing even familial influences for a third of the respondents. Additionally, there is a pronounced preference for following major U.S. corporations such as Amazon, Netflix, and Apple, with 45% of traders timing their trades to coincide with the opening and closing of U.S. markets.

The strategy of short-selling initial public offerings (IPOs) encountering difficulties is employed by nearly half of the traders, indicating a tactical approach to trading. More than half of the traders (57%) stated they would increase their trading volume if central banks paused or decreased the pace of interest rate hikes. The interest in artificial intelligence (AI) tools for trading is robust, with 59% of traders expressing a likelihood of experimenting with these technologies.

Trading as a Primary Income Source

For a significant number of today’s retail traders, trading has evolved beyond a mere hobby into a crucial source of income. While 24% of traders embarked on trading with the goal of leaving their conventional jobs, 46% were motivated by the desire to augment their existing income. Additionally, 31% of traders engaged in trading to make more effective use of their savings. Importantly, trading accounts for a notable portion of personal income for many, with nearly a quarter reporting that 21-30% of their income is derived from trading activities.

Influences on Modern Retail Traders

The landscape of trading has been fundamentally transformed by digital technologies. The majority of retail traders now prefer using mobile apps over traditional trading methods, closely followed by online platforms at 47%. The traditional offline broker model is declining, as traders increasingly rely on market insights from influencers, with 60% more likely to engage in trading based on influencer recommendations. While family remains a significant influence, it is now secondary to the advice from popular traders and influencers.

Geographic Preferences in Trading

There is a clear focus on U.S.-based stocks and IPOs among UK retail traders, with a substantial portion trading in alignment with U.S. market schedules. Amazon, Netflix, and Apple are among the most monitored companies, indicating a strong U.S. orientation in trading preferences. Among high-income traders, there is a pronounced interest in the Nasdaq 100, surpassing interest in the FTSE 100, which highlights a strategic preference for American market indices.

Traders’ Approach to Risk

The report also sheds light on traders’ attitudes towards market volatility. Nearly half of the respondents find high volatility in the market attractive, suggesting a propensity to trade in more unpredictable conditions. Many traders are also planning to capitalize on potential economic shifts, such as changes in interest rates, to increase their trading activities. Common risk mitigation strategies include managing emotions effectively and diversifying investment portfolios to reduce exposure.

The Future of Retail Trading

Looking ahead, AI is poised to revolutionize the trading landscape, with a significant majority of retail traders open to using AI-driven trading tools. Despite the enthusiasm, there is a notable skepticism among older traders about the adoption of AI technology, reflecting a generational divide in the acceptance of new trading technologies. However, the potential for AI to streamline trading processes and enhance decision-making capabilities is undeniable, promising a future where technology plays an increasingly integral role in retail trading.

“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. 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.”

Methodology

This report is based on an independent survey conducted by Censuswide in November 2023, which included responses from 502 retail traders across the UK, representing a broad range of backgrounds and demographics. The survey employed rigorous methodologies to ensure a representative sample and reliable data analysis.

In conclusion, the ‘Retail Trading Trends 2024’ report by CMC Markets offers valuable insights into the evolving dynamics of retail trading. It underscores the growing significance of trading as a primary income source for many individuals, driven by technological advancements, shifting market preferences, and evolving economic conditions. As the trading landscape continues to evolve, it becomes increasingly imperative for traders to adapt to changing trends and leverage innovative tools and strategies to navigate the complexities of the financial markets effectively. For further details and insights into the evolving dynamics of retail trading in 2024, interested readers can download the full report from CMC Markets’ official website.

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