Retail Investors Have More Time and Incentive to Invest, but How Can They Stay Safe?

Financial markets have been on a rollercoaster for some time as first geopolitical tensions and then a global pandemic swept across the globe. Where has this left the online trading community and are there opportunities for members of the general public to get more involved? Financial IT caught up with Dáire Ferguson, CEO of online trading broker AvaTrade, to find out more

Financial IT: Hi Dáire. The COVID-19 pandemic has turned the world on its head. How has the online trading market fared?

Dáire Ferguson: For a long time now, savers’ rates have been low and other traditional forms of consumer investment have left people in search of a more exciting, rewarding way of growing their savings. Online trading has always provided an outlet for this, and since the pandemic has hit, it has been well-documented that user numbers have soared.

There’s a couple of key reasons for this. Notably, increased market volatility amidst economic turmoil has increased the scope for new sources of revenue, attracting users with the promise of potentially significant gains. In addition, with more free time under lockdown, people have had the time to educate themselves on online trading and taken the opportunity to dip their toes in the water.

Financial IT: A volatile market certainly offers great scope for profit, but other companies now warn that the majority of retail accounts lose money. How do you manage this?

Dáire Ferguson: It’s well known in the industry that online trading presents significant scope for loss as well as profit – especially for those that are inexperienced or are still developing their understanding of the market. As a brand that prides itself on safety and regulation, we offer comprehensive education and support, as well as a number of risk management tools. In addition to common “take profit” and “stop loss” orders, we have developed our own unique tool, AvaProtect, which enables our users to significantly limit the downside risk of trading, without limiting the upside.

Financial IT: What is AvaProtect and how does it work?

Dáire Ferguson: AvaProtect works by allowing users to protect their positions for a defined period of time in exchange for a small fee – similar to the premium on an insurance policy. Clients open a trade, select the protection tool and, at the end of the period, if the protected position has dropped in value, they are fully reimbursed for any losses made, giving them the confidence to continue to trade while learning about the market. On the flip side, if the initial trade indeed makes a profit – there was just a small fee paid to protect this. It is a win-win situation for clients.

This is particularly useful for highly volatile assets. Take gold, for instance, which has seen significant intra-day volatility, while maintaining a consistent upward trend in recent months. Taking out AvaProtect on an open position on gold can help traders mitigate the risk of a short-term loss while staying in the trade in anticipation of a longer-term gain.

We are really excited about the potential for this product. It’s a powerful tool for managing risk and limiting losses at a time where this is central to traders’ thoughts and, to our knowledge, there isn’t anything else like it on the market.

Financial IT: How will products like AvaProtect shape the future of the market?

Dáire Ferguson: I think the industry will become more accessible to wider range of users as risk management products become more prevalent. For many, educating themselves on the market is crucial when it comes to trading confidently, yet learning the ins and outs can be time-consuming.

Indeed, even the most experienced traders are liable to be caught short by unexpected market moves – and AvaProtect has seen equal levels of interest from both novices and seasoned traders as a result.

Risk management tools help mitigate the effect of these unexpected swings, meaning people can get trading quicker, without relinquishing control over their money and more experienced traders can capitalise on even greater flexibility to determine how they want to balance their risks.