In the past, you had to be wealthy or work for a large company to trade stocks, commodities, and currencies. But the internet has changed all that. Now it is possible for almost anyone to trade these assets.
Day traders are people who attempt to make money on short-term price movements. They don’t invest over long periods of time. As the term suggests, most trading strategies are designed to work within a day.
Below we’ve highlighted a number of facts and figures that might encourage you to spend the time and effort to learn to become a trader.
There Are Still Winners in 2020
Given the stock market plunge in mid-March, you might think this is not a good time for trading or investing. To be sure, there have been bizarre movements in the markets since the coronavirus pandemic spread. However, savvy traders can profit from both upturns and downturns.
Here are some standouts.
- Silver is up 36% year-to-date, out-performing all other major commodities
- Gold is up 28% year-to-date
- The NASDAQ 100 is up 22% year-to-date
- 20+-year US Treasuries are up 25% year-to-date
- Orange juice is up 25% year-to-date
- Although crude oil is down 32% year-to-date, it increased by over 95% in the second quarter (Q2).
- After initial plunges, gasoline and the S&P 500 Energy saw steep gains as well in Q2.
Largest Stock Exchanges
The largest stock exchange in the world is the New York Stock Exchange. As of June 2020, it has a market capitalization of $24.231 trillion (US). Nasdaq is less than half its size at $11.658 trillion (US).
Asia has 4 major stock exchanges: Japan ($5.614 trillion), Shanghai ($4.777 trillion), Hong Kong ($4.189 trillion), and Shenzhen ($3.034 trillion).
Europe’s largest stock exchange, Euronext has a capitalization of $4.418 trillion (US) followed closely by the London Stock Exchange at $3.934 trillion (US). Borsa Italiana has a market capitalization of $602 billion (US).
Crypto Market Is Larger and Broader Than Most Think
The top 100 cryptocurrencies have a total capitalization of over a quarter trillion dollars (US). The top 10 cryptocurrencies represent over 88% of the total capitalization of $264 trillion (US). Bitcoin alone is 64% of this total with Etherum added 10%.
In addition to having the largest capitalization, bitcoin is the most valuable digital coin, at over $9,200 (US) as of July 2020. In general, there is no correlation between a cryptocurrency’s price and its capitalization.
Note, however, that $11.5 billion (US) of cryptocurrencies were used for criminal activity in 2019. This only represents one percent of all transitions, but beware of scams.
Currency Trading Volumes Are Huge
Over $5 trillion dollars in currencies are traded each day. In terms of trading volume, this is the biggest market in the world.
At the same time, people are using less paper currency as they do more shopping online. The COVID-19 pandemic has certainly highlighted this. But it has also highlighted cash as a transfer medium for infectious diseases.
According to one study discussed by The Washington Post, “Over 90 percent of United States paper money contains bacterial colonization, mostly from Staph aureus, Salmonella and E. coli.”
Commodity Use Is Rising
According to the Food and Agriculture Organization (FAO), agricultural trade increased by a factor of three from 2000 through 2016. The world will need to increase agricultural production by another 50% by the year 2050.
The US Energy Information Administration (EIA) says that natural gas and petroleum demand in Asia will increase by 22% by 2050 while the total supply will lag this by increasing at the slightly smaller rate of 21%. During the same period, electricity generation should more than double with increases in renewable energy and decreases in coal.
Future low-carbon technologies are expected to increase demand for rare earth metals like Lanthanum and Cerium as well as metals like copper and silver.
In order to be a successful day trader, you will need to learn more — especially about technical trading techniques, which allow you to analyze short-term movements in a market. This requires a lot of work but the statistics that we’ve listed above show that it is worth the effort.
The stock, crypto, currency, and commodities markets are enormous and they expand each year.
Editor’s Note: Commodity prices cited here are based on The Wall St. Journal tracking of the continuous front-month futures contracts, as accessed on July 30, 2020.