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During the Internet bubble around the turn of the century, not a day would go by that a future Fortune 500 wasn't hitting the stock market for the first time as part of an Initial Public Offering (IPO). For those unfamiliar, an IPO involves offering new stock shares in a private company on the open market to stock investors.

Why initiate the Initial Public Offering process? For one, the IPO process is a way for private companies to raise capital or reward initial investors. Generally, the stock’s initial price is determined by the potential demand for the stock and the amount of money the company wants to raise. Once the shares open up for sale on the open market, market forces take the stock in one direction or the other, usually upwards.

Besides boosting a company’s market value, going public can provide the liquidity that short-term investors require. Additionally, completing the IPO process can help a business owner improve their retention rate, as these company shares will enhance less-than-stellar benefit packages.

Due to the legalities involved with going public, the IPO process can be unnecessarily complicated. Fortunately, the private company in question can partner with legal professionals to help streamline the process.

Advantages of going public

Before initial investors willingly concede to giving up control of their company, they’ll have to understand the benefits they can derive from doing so.

The primary benefit of initiating an IPO has to do with the opportunity mentioned above to raise capital. With this extra capital, a company can fund research and development (R&D) projects, fund business acquisitions, expand company efforts, or reward initial investors.

After introducing the company to the marketplace, a company stands to benefit from the Initial Public Offering process. In most cases, undergoing the IPO process will swing open doors and allow the company to gain market share for its products or services.

Besides boosting a company’s market value, going public can provide the liquidity that short-term investors require.

Downsides of going public

Of course, there are some disadvantages a company must manoeuvre when going public.

Firstly, there’s a significant cost associated with undertaking the IPO process. These costs include accounting and legal services to prepare for the IPO proceedings and the marketing costs of raising public awareness and piquing community interest.

Secondly, the new company's reporting requirements rise significantly. Under the scrutiny of the Securities and Exchange Commission, the company has to provide quarterly and annual financial information as a form of transparency to the government and investors.

Finally, the IPO process wrestles some management control away from initial investors/owners as a Board of Directors takes over.

The roadmap for an IPO

As was stated above, the IPO process is very complicated. For an IPO to legally and successfully make it to the IPO closing, every "i" needs to be dotted, and every "t" needs to be crossed.

If you’re contemplating taking your company public, you could probably use a roadmap to get your company where it needs to go. To help in that regard, here are the most important steps you would need to follow.

Securing the services of an underwriter

An underwriter is an investment bank specialist assigned to lead the company through the IPO process from a financial perspective. These underwriters assume the responsibility of setting the initial price. Often, these IPO players participate by selling/marketing the stock and becoming actual investors.

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Setting the IPO guidelines and framework

Once the underwriter is in place, there are many legal documents and agreements that the designated parties must fill out and sign. This list of documents/agreements includes (but is not limited to):

Roadshow and price setting

This stage is when marketing personnel make presentations to top investors and brokers to drum up interest and determine potential demand. This information collected during these presentations forms the basis for setting the initial price of the offering.

The quiet period

After executing marketing-based efforts, there comes a 25 day "quiet period." During this time, underwriters are granted access to oversubscribed purchases of the stock. This window, dubbed the quiet period, is the timeframe where the "lock-up" period is set. The lock-up period, usually 90 to 180 days in length, is when insiders can’t dump their allotted shares on the market.

IPO closing

IPO closing is the day and time when the IPO goes to market, and stock transactions can begin. To reach this long-awaited day with ease, follow the steps outlined above.

Giles Coghlan, Chief Currency Analyst at HYCM, offers Finance Monthly his insight on the possible impact the Biden administration will have on the markets.

The 2020 US Presidential election has produced what now seems to be a clear result: Joe Biden will be the next President of the United States. Interestingly, during the same week as the election, Pfizer announced that their COVID-19 vaccine was 90% effective, precipitating a major market rally as a result. Any market shifts that came a result of Biden’s victory were amplified by the positive market response to this pharmaceutical development.

However, it’s still worth considering what a Biden presidency means for British and American investors. COVID-19 won’t occupy the entirety of the Biden administration’s tenure, and the huge policy divergence between Joe Biden and Donald Trump means that we’ll undoubtedly see the financial markets reacting differently in the years ahead.

So, with this in mind, there are certain aspects investors could consider following Biden’s election victory. Although it’s still too early to make any concrete forecasts, especially with control of the Senate hanging on Georgia’s run-off elections, there are still important observations that can be made.

Checks and balances

Although the upcoming Georgia run-off senate race is being hotly debated within the US media, the reality is that Republicans will almost certainly retain control of the senate throughout the Biden Presidency.

For investors, this may represent great news. Analysis of all Presidential scenarios since 1945 reveals that a Democrat president governing with a split congress generated, on average, the best average annual returns for the US stock market – nearly 14% in dollar terms - according to UK firm Quilter Cheviot.

The reasoning behind this comes down to constraining what the President can accomplish. A split congress, as Barack Obama discovered in his final two years in office, can mean that much of what a President attempts to deliver is quickly impeded by filibusters and congressional obfuscation. This is especially the case in the senate.

Although the upcoming Georgia run-off senate race is being hotly debated within the US media, the reality is that Republicans will almost certainly retain control of the senate throughout the Biden Presidency.

But what could a split Congress mean for Biden? Ultimately, it might constrain his ability to introduce larger economic support spending, health or tax reforms, and climate-related legislation. Stocks and assets that performed well during the last four years would, in this scenario, largely continue to perform well. However, if Biden manages to clinch control of the Senate, how would his ambitious plans impact the markets?

All about tax

Trump’s most impactful economic policy, by far, was the cutting of the US corporate tax rate from 35% to 21%. Investors, traders, and CEOs all benefited massively from this, which is part of the reason why the Dow Jones has been making steady gains during Trump’s presidency.

Biden’s tax plan, increasing the corporate tax rate to 28%, would be seen as a huge blow to many US businesses. Although still 7% shy of the tax rate in place before Trump took office, many of the companies listed on the benchmark S&P 500 index could see their margins shrink if such tax reform was implemented.

The biggest winners from the Trump Tax cut, including AT&T, Hilton Worldwide, General Motors and Walgreens Boots Alliance, would all be hit hard from this shift in tax policy. Whether Biden is successful in enacting his envisioned tax reform, however, is still yet to be decided.

Technology on the horizon

The performance of technology stocks this year has been keenly observed by investors and traders. We’ve seen Apple become America’s first $2 trillion-dollar company and the working-from-home revolution facilitate a surge in remote-working shares, including Slack, Zoom, and Amazon.

A tech sell-off has already begun in reaction to Pfizer’s aforementioned vaccine development, but would this accelerate upon Biden moving into the White House? Democrats like Elizabeth Warren have vowed to do everything in their power to break up Amazon, Google and Facebook via anti-trust regulations; a move that could see millions of dollars of value wiped in an instant for these companies.

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Depending on whether Biden shares the ambition of his Democrat colleagues in this regard could facilitate a huge shock for investors in US technology. Those who own stock in, for example, Facebook may have to decide between keeping their shares in the core Facebook product or, alternatively, Instagram if a break-up of the company goes ahead. Although action of this kind is definitely more likely to occur under a Biden presidency, we will have to wait and see whether this transpires.

Preparing for 2021

In general, then, investors should be closely following US political developments if they own shares in any American-based companies or major stock indices such as the S&P 500. If Joe Biden is successful in the Georgia senate run-off elections, then it’s possible that many of his more ambition plans may be attempted, leading to huge ramifications across numerous asset classes.

The immediate reaction would likely be a large initial surge in US stocks in anticipation of a larger US stimulus package.  Alternatively, a Democrat President and Republican Senate will likely facilitate much more political compromise in American politics, which itself guarantees a certain level of economic certainty that, subsequently, will allow financial markets to grow and grow.

So, in many ways, with the large amount of fiscal stimulus, QE, low Fed interest rates, and willingness for the US to take on debt, I believe the US stock market should ultimately benefit either way in the medium to longer term. We are in an age where fiscal conservatism is dying and that should boost US stocks over the next Presidential term.

High Risk Investment Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. For more information please refer to HYCM’s Risk Disclosure.

Karoline Gore explores the current state of the EV market and the trends that have sparked its rise – and what this may portend for automated vehicles too.

The electric vehicle (EV) market is one that has an absolutely undeniable place in the future, but investment markets haven’t reflected that in value. According to experts providing comment in USA Today, Tesla saw a bear market in the early part of 2020, before striking upwards into their now sky-high value. A few key events have led to this surge, but they’ve now successfully started a trend. For a few key reasons, EVs have now established themselves as a bull market that will continue to rise – and big names are showing the way.

Big companies buy in

Tesla and their associated manufacturers are, of course, big names, but they lack a little bit of credibility as compared to the old-school big American auto houses. While EVs have an unassailable status as the future of the automotive market, it’s been a slow process to get these older manufacturers onboard. This has changed with the huge market intervention of GM, who have recently put $2 billion into EV production to up their share of the market. This has led to news outlets, including CNN, advocating an investment portfolio that looks into companies like GM – a sharp change from recent months; March saw their stock drop to a low not seen since before 2012. This type of disruption from the institutional auto manufacturers of the USA indicates the upwards trend and interest in the market; something which should only continue to become more relevant in a geopolitical sense.

Geopolitical movement

The Trump administration has been broadly opposed to green measures, whereas a Biden government has promised to become more climate-positive. Whatever the ultimate outcome of the election, there are indications that public opinion will keep moving forward in favour of green measures. According to the BBC, areas of industry and energy production have continued to grow where they favour green measures, and shrink in areas where they rely on fossil fuels and processes harmful to the environment. This points towards a future where society is dictating what products they want, and that’s a good one for EVs – especially when considering their logical, efficient endpoint.

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The automated revolution

EVs will ultimately give way to automated vehicles. There are already plenty of models on the market that achieve 1 and 2 stage automation, meaning that the driver still has most control, with stage 3 being absolute control by the computer of the vehicle. This is the logical place where EVs will move to in the future, and offers huge benefits for business. Businesses as huge as Walmart have already invested heavily in the technology, given the benefits it can bring to the bottom line. As a result, automation can only grow, and putting money into the industry will only yield returns as the years go on.

For that reason, this form of investing favours a long-term view. That being said, it’s a good time to start getting involved – before huge gains are made by the big auto houses and the industry is swamped.

Forex signals contain trade recommendations that tell you - the forex trader - which forex pair to trade, whether to buy or sell it, when to enter the market and how much profit you can aim to generate by following their specific ideas. While some forex traders choose to exclusively follow the trade ideas given by signals, others use these signals as part of their deeper analysis into the market to come up with their own, unique trading strategy.

As a forex trader, whichever way you choose to depend on forex signals, it helps to get a better understanding of what they are and how they can help you trade better. Here are some key aspects of forex signals you should know before you start using them as a tool to help you trade the forex market.

How do forex signals systems work?

There are essentially two kinds of forex signals systems – automated and manual. Read on to understand what goes on in the background and how each kind of forex signal is derived.

Automated forex signals: Automated signals are created by professional analysts and/or traders in conjunction with code developers, and use algorithms to recommend trade ideas based on historical trends on how the market moves. This type of signals exclusively uses technical indicators to observe and identify trade ideas. While the concept may sound a bit too complex, automated signals systems use several mathematical formulas to discover patterns and send out forex signals when there is a match with parameters their algorithms are programmed to detect.

Such systems are also known as forex robots or Expert Advisors (EAs) as they require no human intervention to analyse the market and come up with trade ideas. Most forex bots let you pick and choose various parameters and technical indicators that are used for the analysis to come up with signals. In addition, such systems also let you customize the spreads and currency pairs you wish to trade. Automated trading signals systems analyse technical indicators and price action to publish signals with high probability of success based on historical data on market movements.

Manual forex signals: On the other hand, manual forex trading signals are generated by professional analysts and/or traders who use technical indicators along with fundamental analysis of the markets to identify potential trade recommendations. This includes examining past information about the price and trend in a specific forex pair. Where manual forex signals differ from their automated counterparts is in the next step: analysts who put out such signals also study current news events, also known as fundamental indicators, that could influence price action in the forex pair.

While some forex traders choose to exclusively follow the trade ideas given by signals, others use these signals as part of their deeper analysis into the market to come up with their own, unique trading strategy.

Fundamental indicators such as financial and political developments and market sentiment tend to have a heavy influence on a forex pair’s movement, and this coupled with analysis of popular technical indicators on charts can offer an insight into which way a forex pair could move and by how much, so that you can jump in and profit on the movement.

While some signals systems offer forex trading signals for free, others employment a payment or subscription-based model to provide this information to you. Payment can vary from anywhere between $40 and $50 all the way up to even $500. When you subscribe to such a service, either for free or on payment, you will receive alerts via text, email or app notifications by the system whenever a new forex signal is published.

What are they based on?

As you learned in the previous section, forex signals can be generated through the analysis of technical and/or fundamental indicators. But what do we mean when we say this? To become an informed forex trader, here’s what you need to know about these indicators and their relationship with forex trading signals:

Fundamental indicators or fundamentals: Fundamental analysis involves understanding the impact the real economy has on forex markets and currency pairs. Some of the popular fundamentals used to generate forex signals include:

Technical indicators: Technical strategies are vital in identifying entry and exit levels of forex signals. Fundamentals can be used to determine the direction of movement in a forex pair, i.e., whether to enter into a buy or sell trade. On the other hand, technical indicators tell you how much of a range you can trade in and hope to earn profits, or essentially, how much risk you can take. Some of the most commonly used technical indicators in identifying forex trading signals include candlestick patterns like the bullish engulfing candle and shooting star patterns, Fibonacci indicator, head and shoulders pattern, divergence, triangles and wedges, Elliot Wave pattern, liquidity and hedging.

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How can forex traders use them?

Forex signals systems send alerts to you whenever they publish a new signal, either on your email or on your smartphone. Once you receive the signal, and if it is a trade idea you are interested in, you can go ahead and place a trade based on it. Here are two ways to use this information:

For non-professional traders: As a novice who is unsure of how the forex market moves, it is safer to rely entirely on the forex signal for your trade idea. This means that you use the information provided just as it is, making no changes whatsoever to the recommended levels for entry price, stop loss and take profit. Depending on the signals system you use and its level of integration with your trading account, you can either copy the trade automatically with just a click of a button on the alert or manually copy the levels mentioned in the forex signal into a new trade that you open.

For professional traders: Once you feel more confident and have earned enough experience to conduct your own analysis and get a deeper understanding of how forex trading works, you can use these signals as an additional tool to assist with your analysis. You can use the trade recommendation provided by the forex signal and build up on it through your own technical and/or fundamental analysis, and choose to change the levels based on your risk-taking capabilities. For instance, if you feel confident that the price action could be more than what the forex signal suggests, you can move the take profit and stop loss levels further away to generate more profits.

To conclude

Whatever forex signals systems you sign up for and however you choose to use the signals to help you become a better trader, do keep in mind that forex trading comes with its own share of risks and that there are no guaranteed profits to be made. Forex trading signals, while extremely useful, do not assure profits but can reduce some amount of risk from trading. It is up to you to use your discretion and trade carefully and wisely by managing your risk to generate profits.

Stuart Lane, CEO at Trade Nation, shares his findings on the trading habits of millennial and Gen Z investors and how they have been influenced by emerging trading platforms.

There’s been a surge in trading interest among the whole population since the start of the coronavirus pandemic, but especially so in millennials and Gen Zs. A survey by E*Trade Financial Corp found that over half of younger investors have traded more frequently, and while many have made notable gains, there have also been some serious losses.

Roughly 46% of millennials and Gen Zs are trading derivatives more frequently — double the average rate. What’s more, 51% say their risk tolerance has increased. This makes for a potentially dangerous combination, especially for amateurs, of whom there are plenty. Robinhood (by far the most popular trading app of millennials and Gen Zs) has said almost half of its new customers this year are first-time traders who, therefore, may not know the risks surrounding complex derivatives such as CFDs. As Trade Nation notes: “CFD trading certainly isn’t straightforward and there’s a lot of confusing terminology and hidden costs involved too. This means it usually isn’t the best way for traders to kick off their journey.”

And in addition to the risks individual traders may be opening themselves up to, experts like Princeton economist Burton G. Malkiel believe that the outlandish trading activities of millennials and Gen Zs are also wreaking havoc on the financial markets.

Why are young people trading more?

The general consensus is that trading has been a great way for the younger generations to fill extra time and deal with the boredom of lockdown. As the founder of RagingBull, Jeff Bishop, told CNBC: “A lot of people are at home and have got more time on their hands. And many, unfortunately, have lost their jobs and are looking for new opportunities. Younger investors are looking for ways to recoup their money.” Furthermore, many Americans have been able to fund their trading activities with their government stimulus checks, with software and data aggregation company Envestnet Yodlee reporting that trading was among the most common uses for the checks in almost every income bracket.

There’s been a surge in trading interest among the whole population since the start of the coronavirus pandemic, but especially so in millennials and Gen Zs.

Apps like Robinhood, eToro and RagingBull have also made trading more accessible for these traders, seeing demand for their services rise by 300%, 220% and 158% in the first quarter of 2020, respectively. And given that the vast majority of millennials and Gen Zs have been using their smartphones more due to the coronavirus outbreak, it’s unsurprising that the time spent on apps like these has also increased.

What are millennials and Gen Zs trading?

The E*Trade survey found that almost half of young investors are trading derivatives more frequently compared to 22% of the general population, while there’s been an especially sharp increase in options trading. What’s more, the surprising nature of their most popular stock picks have stunned, and perhaps even humbled, many Wall Street investors.

"We see a lot of buying activity of specific industries that were impacted by the pandemic," said Robinhood co-founder Vladimir Tenev, as reported by CNN. He singled out shares of airlines, videoconferencing and streaming media companies, and biopharmaceuticals. For example, even though Warren Buffet dumped his airline shares in light of the coronavirus travel restrictions, millennial and Gen Z traders had faith in a recovery. Frank Holmes, CEO of US Global Investors, told CNN that he noticed a surge in interest for the JETS airline ETF in March. Examining Robinhood trends, he learned that plenty of young investors had been buying it after a major dip. The funds' assets went from $34.6 million at the start of March to $615 million by the end of April — a 1600% increase.

“Although a lot of people may say that it’s crazy, it has turned out pretty well,” JJ Kinahan, the chief market strategist at TD Ameritrade, told Bloomberg. “Retail investors for the last few months have been a little bit ahead of the curve. There’s been a lot more perhaps optimism among retail traders around the turnaround than there has been from professionals. This continues to show that.” However, it’s inconclusive whether moves like this are really paying off for younger traders. While some analysts (such as those at Goldman Sachs) claim the stocks of Robinhood investors have outperformed hedge funds and the indices, others have found a negative correlation between these stocks and their returns.

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What are the potential problems of this?

Empowered but inexperienced traders

Robinhood has been the app of choice for many millennial and Gen Z traders, and though their ambition to “democratise finance for all” has clearly appealed to this market, it also means that many amateurs have jumped into trading without any experience and gone on to make grave mistakes.

“Robinhood has gamified investing. Trading is now so simple that it can be easy to make impulsive decisions,” one millennial investor told Financial Times writer Siddarth Shrikanth, adding that they immensely regretted the progressively riskier trades they had made during lockdown. Shrinkanth noted that while Robinhood doesn’t provide investment advice, it does “little to deter poor decisions”. For example, almost 200,000 users were holding very complex United States Oil ETFs in the days after it crashed in April. “Why were younger investors drawn into volatile commodity tracker funds, despite repeated warnings from regulators that these risky products were unsuitable for retail investors?” he questioned.

Many millennials and Gen Zs are diving into trading complicated financial instruments without fully understanding the risks. And as well as the potential for devastating losses, this can also come at a tragic human cost. Alex Kearns, a 20-year-old Robinhood trader died by suicide after seeing an unexpected $730,000 negative balance on his account, which he didn’t understand and may have only been temporary.

Many millennials and Gen Zs are diving into trading complicated financial instruments without fully understanding the risks.

Volatile markets

In addition to the potential problems for individual millennial and Gen Z traders, it’s also thought that their activities may be having a significant impact on the markets. For example, having filed for bankruptcy in May, Hertz shares had surged 800% just a few weeks later, with this being one of the most popular Robinhood stocks. Stocks like these may be rallying because of the sheer number of users on the platform — there were more than 160,000 Robinhood investors who owned Hertz stock as of 17 June.

That said, not everyone believes millennial and Gen Z traders are responsible for inflated stock prices. “In June, Barclays published a study of moves in the S&P 500 and positions taken by ‘Robinhooders’,” explained The Telegraph’s Garry White. “It concluded that retail investors speculating in stocks are not responsible for the market’s rally and the top picks of the app’s users tended to underperform, and moves in the S&P 500 were independent of the positions taken on these apps.” He also concluded that while many Robinhood users may see big gains, ultimately: “this strategy needs a lot of attention to follow market moves and it seems inevitable that most will eventually lose money”.

European markets and US futures were boosted on Tuesday as promising COVID-19 vaccine news and the beginning of a formal transition towards the incoming Joe Biden administration after weeks of delays helped to increase investor confidence.

In the UK, the FTSE 100 gained 0.9%, while France’s CAC 40 and Germany’s DAX both rose by 1%. The pan-European Stoxx 600 also climbed 0.7% and oil and gas stocks bounced by 3%, with almost all sectors and major bourses heading into positive territory.

Nasdaq, S&P 500 and Dow Jones futures saw gains of their own, rising 0.5%, 0.7% and 0.8% respectively.

By comparison, Asian markets saw mixed results overnight. South Korea’s KOSPI was up 0.6% while the Hong Kong Hang Seng rose by 0.3%, but China’s Shanghai Composite and Shenzhen Component slid by 0.3% and 0.4% respectively. Australia’s S&P/ASX 200 and Japan’s Nikkei saw the greatest gains, respectively surging by 1.8% and 1.11%.

On Monday, US General Services Administration head Emily Murphy wrote a letter to President-elect Joe Biden confirming that the formal transition process could begin. Also, on Twitter, President Donald Trump wrote that he had told his team to “do what needs to be done with regard to initial protocols,” though he gave no indication of abandoning his earlier claims that massive voter fraud had been perpetrated against him during the election.

Markets were also cheered by Biden’s reported plans to take on former Federal Reserve Chair Janet Yellen as the next US Treasury Secretary.

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Risk appetite was further strengthened by ongoing progress on COVID-19 vaccines. Most recently, AstraZeneca announced that its vaccine candidate could have an efficacy of as much as 90% in addition to being cheaper to make, faster to scale up and easier to distribute than vaccines produced by rivals Pfizer and Moderna.

However, are there also cases in which these practice accounts would be used by more experienced traders, and if so what are they?

The Features That They Offer

To understand why people of different experience levels use demo trading accounts, we need to first of all take a look at what features they include. Generally, they will offer a full range of functionality, allowing users to carry out similar trades to those which they would make with real money.

Some trading services offer a fully functional demo platform that can be accessed on desktop or mobile devices. Support and education is also provided to users, including a selection of webinar sessions.

Through demo trading accounts, users can trade products based on stock indices, commodities, forex, and economic event markets. They can carry out the full transaction from start to finish, letting them see how much money they likely would have made or lost on a comparable real transaction.

A Way to Try Out New Strategies

For an experienced trader, perhaps the biggest reason for using a demo account is to try out new strategies. For instance, it could be used to attempt an advanced scalping forex approach, or to use triangular arbitrage techniques.

Most traders will have one or more strategies that they feel completely comfortable with. Yet, in different economic situations it may be necessary to turn to new strategies that they have never used before.

By doing so with a demo account, the risk of any financial loss if it goes wrong is removed. Any mistakes that the trader makes on the new strategy adds to their learning experience without causing any negative effects.

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The Option of Looking at Different Markets

It may also be the case that a trader is experienced in one market but would like to diversify into another. One example is that they may be a forex expert but decide that they want to try and make money from stock market trading too.

This could happen because they feel that the market they currently focus on doesn't offer good investment opportunities right now. It could also be the case that they want to test themselves or just explore new ways of using their skills to potentially make more money. There are advantages and disadvantages to both stock market and forex trading to be considered.

In this situation, their existing knowledge will be useful, but there will be gaps in their expertise that need to be filled in. This could be in terms of learning new strategies or in discovering the tools that give them most value in their new type of trading.

Every Trader Can Use a Demo Account from Time to Time

An experienced trader might go through long spells in which they don't have much need for a demo account. Yet, they are also likely to find that it is something that comes in handy at certain times.

Global stocks slid back on Friday as a surge in European and US COVID-19 hospitalisations dampened investor enthusiasm after a week of vaccine-spurred optimism.

However, news from Edison Research that President-elect Biden was set to cement his election victory in Arizona looked to give the US market a firm opening. S&P 500 and Nasdaq futures were both up 0.9%, while Dow Jones futures rose 1%.

European stocks fared worse as COVID-19 hospitalisaions rose to a record level in France, while the daily infection rate in the UK surged more than 50% to over 33,000. The UK’s FTSE 100 was down 0.1% as trading opened, while Germany’s DAX was up 0.4% and France’s CAC 40 gained 0.6%, with analysts reporting that investors were torn between fears over rising COVID-19 cases and optimism over Pfizer and BioNTech’s COVID-19 vaccine candidate.

Michael Hewson, chief market analyst at CMC Markets, linked dwindling investor enthusiasm in Europe directly to the ongoing COVID-19 pandemic. “With both France and the UK already in the midst of a temporary lockdown, there is a concern that unless the case rate slows, any relaxation of restrictions could take longer to unfold, and increase the longer term potential for economic damage along with that,” he said.

Elsewhere, Asian stocks fell overnight, with Japan’s Nikkei shedding 0.5% while the Hong Kong Hang Seng and the Shanghai Composite fell by 0.3% and 0.8% respectively. With Australia’s ASX 200 also falling 0.2%, the only major Australasian index trending positively was South Korea’s KOSPI, which rose 0.7%.

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While global stocks have seen a boom week following the announcement of Pfizer’s effective vaccine candidate, the heads of the Federal Reserve, ECB and Bank of England all warned late on Thursday that even an effective vaccine would not immediately end the social and economic impact of the pandemic.

The outgoing Trump administration has unveiled an executive order banning US investment in Chinese firms that it says are owned or controlled by the Chinese military, adding further economic pressure on Beijing.

The order has the potential to impact some of the largest Chinese companies, including telecom companies China Mobile Ltd, China Telecom Ltd and surveillance equipment producer Hikvision.

From 11 January 2021, the order will prohibit US investment firms and pension funds from purchasing the securities of 31 Chinese companies that the Defense Department identified as backed by the People’s Liberation Army earlier this year. However, transactions made for the purpose of divesting ownership in these companies will be permitted until 11 November 2021.

“China is increasingly exploiting United States capital to resource and to enable the development and modernisation of its military, intelligence, and other security apparatuses,” the order said.

It is not yet clear how much impact the order will have. The affected companies do not appear to include publicly traded Chinese tech giants, while several other tech firms (including Huawei) do not trade on the stock market. Some of the firms said to be affected are state-owned companies with no foreign stockholders, such as China Electronics Technology Group, though others – such as CRRC Corp – do have foreign investors.

According to investment strategist Andy Rothman of fund manager Matthews Asia, US investors own around 2% of the value of the companies traded on the Chinese stock market, meaning that the order is unlikely to be greatly consequential to the Chinese economy.

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As the order allows ownership in the listed companies to be retained until 11 November, there is a significant possibility of the incoming Biden administration rescinding the order before it can affect US shareholders.

This morning, pharmaceutical firms Pfizer and BioNTech reported the preliminary results for testing of its COVID-19 vaccine candidate, which was found to have prevented more than 90% of infections in volunteer subjects.

The news immediately energised global markets, with the areas that suffered most during the pandemic seeing a resurgence. The world’s leading indices took off, with the pan-European Stoxx 600 rising by 5%, ,while the FTSE, DAX and CAC 40 rose by 5%, 6% and 7% respectively.

US futures were also buoyed by the news, with Dow Jones and S&P 500 futures respectively rising by 5% and 4%.

Predictably, the manufacturers of the successful vaccine candidate saw a rush of positive attention from investors. Pfizer’s share price rose 6% at the open, while BioNTech’s rose by 18%. The swell even lifted rival pharma giant Moderna, whose candidate vaccine is based on similar technology, by more than 5%. Meanwhile, shares in rival AstraZeneca fell by 2%.

News of the promising vaccine trials had a remarkable effect on market areas that had been most heavily impacted by the COVID-19 pandemic. Airline stocks soared, with Easyjet rising as much as 26% on the announcement, while British Airways owner IAG soared 30%. Other COVID-struck areas, such as energy and auto stocks, saw dramatic gains as well; Brent Crude and West Texas Intermediate rose by 8% and 9% respectively, while Volkswagen and Daimler both jumped 6% higher. At one point, cruise operator Carnival gained as much as 30%.

Meanwhile, stocks that saw great gains during the pandemic saw sharp drops in value. Amazon fell by over 3%, and videoconferencing company Zoom fell as much as 20%.

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“It's clear the market is forward looking and pricing in recovery in a number of beaten-down areas next year," said Neil Wilson, chief market analyst at Markets.com, though he warned that investors “should not be jumping any guns here”.

The scale of growth seen in the major indices is a very rare occurrence; the FTSE 100 alone gained £82 billion in value in its best day since March.

On the heels of Election Day, capping one of the most contentious presidential election cycles in US history, markets have been roiled by the combination of an unclear victor – with millions of absentee ballots yet to be counted across several key states – and a premature claim by President Donald Trump that he had won the race.

European markets reversed their gains from Tuesday, when investors had been betting on a clean victory for Democratic presidential nominee Joe Biden. The FTSE 100 lost 1.1% as trading opened, with the CAC 40 and DAX falling 1.4% and 1.9% respectively. Yields on popular bonds also slipped as investors took refuge, with demand rising for US Treasuries and German Bunds.

Wall Street futures fell following Trump’s comments on Wednesday morning, but quickly recovered. The S&P 500 gained 0.5% while the Dow Jones lost 0.2%, and the tech-focused Nasdaq jumped by 2.5%.

“The polls are proving wrong again,” said Giles Coghlan, Chief Currency Analyst at HYCM, pointing to the near certainty of a contested election in accounting for markets’ new uneasiness. “As we are already seeing this morning, the Dow Jones and US Dollar will be in a volatile state until there is a clear outcome that both parties will accept.

“US stocks are selling off on the uncertainty, reversing the gains expected from a Biden victory as projected by the polls. This will also have significant ramifications on the performance of other major currencies and assets. So long as the uncertainty remains, I’m expecting investors to sell global equities, and their holdings in currencies like the Euro and US Dollar. At the same time, we should see inflows into the Japanese Yen.”

Giles also remarked that there are still reasons to be optimistic in the medium and long term. “Regardless of who is the next US President, the coming US stimulus bill should lift US stocks, once we have a winner confirmed,” he said. “Furthermore, over the medium term, even if gold sinks a little lower on a firmer US Dollar, the price of this safe haven asset should still rise in the coming months and into 2021. Low interest rates are projected to remain unchanged for the next three years by the Federal Reserve, and the large quantitative easing program will support the longer-term appeal of gold.”

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Nigel Green, founder and chief executive of deVere Group, urged investors to exercise caution as the results of the election are challenged in court. “This monumental uncertainty in the world’s biggest economy is going to send global stock markets into a tailspin as investors get rattled about a clear outcome taking longer to reach than they hoped,” he said.

The CEO added that renewables, industrials and cyclical stocks are likely to perform well under a Biden administration, while the oil and gas, financial and healthcare sectors will likely do better under Trump.

“History shows stocks tend to rise regardless of which party controls the White House, but it matters how your portfolio is balanced,” he said. “Therefore, investors should sit out the temporary volatility until the picture becomes clear.”

Giles Coghlan, Chief Currency Analyst at HYCM, takes a look at both candidates and the significance their victories might have for investors.

This week’s US presidential election will certainly be one for the ages. American voters will be heading to the polls today to elect Joe Biden as the 46th US President or continue with another four years of President Donald Trump. If you believe the polls, Joe Biden is edging ahead of Donald Trump. If 2016 taught us anything, however, the polls should be viewed with a grain of salt.

Investors and commentators have certainly learnt some important lessons, with many adopting a ‘wait and see’ approach. Those who hedged against a Trump victory in 2016 saw their portfolios take a big hit, though the equities rally in response to Trump’s corporate tax cuts likely helped such investors recuperate their losses over his premiership.

For now, it is important to consider what either a Trump or Biden victory could mean for the financial markets. Both candidates have touted some policies which will no doubt affect the performance of different assets. While everything is still up in the air, there are still significant observations to be made which I have detailed below.

President Joe Biden

First and foremost, I expect that investors will flock to green energy companies listed on the Dow Jones if the Democrats emerge victorious. Although not fully implementing the “Green New Deal” proposed by Democratic members of the House of Representatives, Biden has voiced his support of renewable energy and shown a willingness to gradually ween the US economy off its’ dependence on petroleum oil. At the very least, a Biden administration would be keen to re-join the Paris Climate Accords that Trump pulled the US out of in 2017.

Biden’s strong chances at securing the Presidency at present have already bolstered green energy stocks, with the First Trust Nasdaq Clean Edge Green Energy Index Fund currently trading at an all-time high. Upon a Biden victory, there could be an immediate surge in stocks related to renewable energy; including companies involved in solar, wind, and battery storage.

First and foremost, I expect that investors will flock to green energy companies listed on the Dow Jones if the Democrats emerge victorious.

Tump Back in the House

Although The Economist currently places the chances of a Trump re-election at only 5%, it’s still worth considering how the markets would react to such an eventuality.

One would anticipate an immediate short-term dollar bounce as global markets prepare for the potential heightening of the US-China trade war. As for the long term, although the Dow Jones reacted positively to Trump’s previous corporate tax cuts; more reforms would be needed to counter the negative effects of the aforementioned trade war.

There have been signs that Wall Street, no longer the political monolith it once was, has soured to Trump – indicating a lack of fear that equity markets would be negatively affected by a Biden win.

However, there is one outcome investors should be especially wary of: one in which Trump loses the electoral college but refuses to participate in a peaceful transfer of power.

A Contested Election

Trump’s consistent attempts to cast doubt on the legitimacy of this week’s election has inspired numerous American business leaders to warn the public about such a scenario, with LinkedIn co-founder Reid Hoffman recently stating: “the health of our economy and markets depends on the strength of our democracy", and that any dispute regarding the election’s outcome would "cause havoc in the business world”.

This is understandable. If 2020 has shown us anything, it’s that markets react negatively to instability and uncertainty. Uncertainty about who is the legitimate President of the United States, therefore, would imbue a fairly high amount of uncertainty into the global markets. This has essentially already been demonstrated throughout the year, with markets wavering each time Trump casts doubt concerning his eventual departure from office.

So, in summary, there are multiple ways that that different outcomes of this week’s presidential election could influence global market stability. For those nervous about their portfolios it is important not to make any rash decisions in a bid to secure short-term gains or to mitigate sudden unexpected losses.

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While the financial markets will undoubtedly react to the events listed above, investors should always take a long-term perspective. Understanding how currencies, commodities, and financial markets are likely to be affected by a changing geopolitical environment is always paramount; however, the long-term impact is always more consequential than the immediate one. Those hoping to make effective, prudent investment decisions would do well to remember this.

High Risk Investment Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. For more information please refer to HYCM’s Risk Disclosure.

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