Updated: April 7, 2020
Recently, I found out that eToro released their internal data on client trades and trends during this coronavirus pandemic. I personally found this very interesting.
So, I wanted to share this with everyone. And hopefully, by knowing where eToro’s millions of users are putting their money on, you can also gain insight on what you should do today.
But before that, I’d like to say that I’m very happy that eToro has decided to release this information. Because institutions in the financial services industry like insurance, banks, and other brokers are often very secretive with their data.
Increased Activity on eToro
Just like us in the Philippines, most countries are currently on lockdown.
With people stuck at home, it’s easy to see traders being able to focus more on their trades. Compound this with the stock market tumble, this has generated increased interest in global markets for many people worldwide.
It seems like for eToro, this meant a 5x increase in new trade positions since the virus started making news. Click the graph to enlarge.
What are people trading on eToro?
In the photo below, you’ll see that indices are the most popular instrument that people are trading. Click the graph to enlarge.
While eToro didn’t release exact numbers, they did say that indices accounted for about 33% of all trades, something never seen before in their history. Meanwhile, stocks, as expected, were close, with 30%, while commodities came in at 16%.
It is interesting to me that cryptocurrencies, once the leading category in eToro, fell to just 7%. Perhaps signifying that Bitcoin hasn’t reached safe-haven status like Gold yet. Or perhaps it was just overshadowed by recent stock market and oil news.
How much do people trust the market?
To answer this question, we can look at the percentage of long and short trades made by eToro users. Click the graph to enlarge.
As you will see above, the percentage of short trades increased by quite a bit. Perhaps that’s because people took advantage of the fact that the market was falling.
In case you’re not familiar, short or sell positions increase in value as the price of the asset goes down. Essentially the opposite of buying or going long. It’s a trading strategy that allows you to make money even when prices are going down.
Unfortunately, short selling is not possible in the Philippine Stock Market. And one of the reasons why during this time, I’m actually more active in eToro.
Furthermore and interestingly, there was an increase in long trades towards the last week of March, coinciding with the release of the US’ $2 trillion stimulus package. Assuming eToro is an accurate representation of the market, it seems people still do trust the markets.
Of course, when using this logic, we have to keep in mind that there will almost always be more long trades than shorts, because the risk in shorts are higher and there are also traders with a long-only strategy.
So, what does this mean for you?
In the world of trading and investing, knowing such information is important. But, what’s more essential is knowing how to interpret these information, and realize how we can profit from them.
As such, you may be asking yourself now, “This is all good, but how do I use this for myself?”
Well, here’s what I think…
First, more and more people are entering the markets – this can be a good thing or a bad thing. What is certain though, is that these new traders can certainly push prices significantly higher or lower. So, expect bigger price swings in the next few months.
Second, there’s less action in some markets, because people are flocking to indices and stocks. This means less activity in cryptocurrencies and in forex. While there will always be people trading these assets, that just means movements might be smaller there.
Lastly, when it comes to market sentiment, I find the “Buy vs Short” graphic the most intriguing because it shows us real data on what traders actually think of the markets. We might be overly pessimistic or optimistic about the markets ourselves, but what moves prices are the sentiment of the whole market.
I don’t want to overload you with information so that’s it for now. But stay tuned as I will dive deeper into what specific sectors in the financial markets are being significantly impacted by this coronavirus pandemic.
In the meantime, if you’re interested in learning how to trade and invest in the global market, then you can join me on eToro and create an account through the link below:
Risk Disclaimer and Disclosure:
The content discussed in this post is intended for educational purposes only and should not be considered as an investment advice. Past performance is not an indication of future results. Moreover, eToro is a brand parter of this website.