Investors, here is why you should use a trading strategy

Since the beginning of the COVID-19 crisis, there are millions of new casual traders around the world sharing the same hope: leveraging their savings, quickly.

Lots of them have been convinced or persuaded by aggressive marketing campaigns on social media. Indeed, new brokers such as E-Toro, Trade Republic, or Robinhood are particularly innovative and efficient when it comes to (aggressive and good) marketing campaigns.

However, these new casual traders are facing one major issue: most of the time, they invest without knowing the risk they are taking, galvanized by well-managed communities of non-professional traders, convinced that they know what they are doing. 99% of the time it ends badly with massive losses and disappointments.

Below is an interesting Tradeciety graph illustrating casual traders behaviors and gains :

But why aren’t casual traders more successful, even with new brokers and new technologies constantly disrupting the game of the market?

Simply put, brokers (old & new) keep pushing traders (experienced or not) to invest without warning them of the risk they encounter. When you are on an app such as Robinhood, you probably are having a great user experience: shiny buttons, smart design, lots of colors. It’s like an online casino and everything is cleverly thought to make you buy and sell as much as possible. The prices are updated every second or millisecond, everything is flashing to induce an excitation, etc. Most of the time, you have no risk analysis of your portfolio or even detailed analysis of financial instruments. You just have a chart with performance and sometimes the latest 3 to 5 news related to the financial instrument.

At ALLUVIE we aim at changing that. Our goal is to give casual traders an opportunity to actually think and understand their investment and to only go on the market when they have a clear idea of what the outcomes may be. We are helping them to build trading strategies and test them to increase their chances of success and profit.

Some would say that trading strategies cannot predict the market and are useless.

The history of the financial market rules against that.

Professional traders rule against that.

Any person who has ever built a trading strategy rules against that.

If you want some proof, you will find below the performance graph of one of the most simple trading strategies. We are building a portfolio on the S&P 500 components and we are comparing the performance of our strategy against the performance of the S&P500:

Strategy Return (blue) against S&P500 Returns (orange) between 2008 and 2021

If you are not convinced there is another portfolio based on the german DAX market (this market has known more turbulence than the S&P500 on the same time range) :

Strategy Return (blue) against DAX Returns (orange) between 2008 and 2021

Of course, there will always be casual traders able to taunt you: “I’ve bet 100% of my savings in one stock and I’ve multiplied my savings by ten within a month”.

But — please ! — think about the risks. Financial markets are not a cozy lottery system. This is also why they are so interesting. Unlike lotteries, you can analyze your investment and you can control an important part of your risks. That’s why trading is also a job and not only a hobby.

If you don’t have any trading strategy ideas, ALLUVIE can help you: you can test our very own trading strategies, free of charge. Our goal is to give you the right tool to improve your odds of making money.

Of course, we are not an NGO and we don’t plan on keeping all our products and features free. We also know that the next few months are crucial for our development as we are in our beta test phase and collecting precious feedback. But contrary to brokers, we are not taking fees on the transaction volume. We only take fees on the calculation power you are using to backtest your strategy and portfolio. We also plan to charge for our advanced features such as our fully automated trading strategies. We intend to keep our fees as low as possible: on average a casual trader will pay less than 5£ a month to access all our services.

If by any chance you want to give trading strategy design a shot, visit our platform today and we’ll give you the tools to build trading strategies without coding and to help you enjoy investing and increasing your chances as well as your profits.