Avramis Despotis, chief executive and chief instructor at Tradepedia, talks about the benefits of investing across assets and markets.
What is the asset class and geography you are focused on?
This is actually one of the biggest challenges that investors and traders face, but Tradepedia trades across all markets. One of the biggest mistakes people make is to focus on one asset class in one market. But at a specific time one asset class performs better than another, and as trend followers we like to trade trending markets. For example, for the first nine months of last year, equity markets in the United States, Dubai and Saudi stock exchanges were trending strongly and forex instruments such as the euro, dollar and the yen were not. So we focused on equities. In terms of commodities, cotton and oil have fallen sharply in the last few months, which was another great opportunity to make money. Now the local markets are not trending strongly but currencies are and the cycle goes on. We have the tools to scan all the markets across asset classes and find the ones that match our criteria and trade those. As a result, we only have one preferred asset class – the one trending now in each country.
What is the outlook for the month ahead?
Currently our favourite market is forex as the end of the quantitative easing (QE) has made clear the direction of the interest rate differential between the US and the rest of the world. As you know what moves the forex market is interest rate differentials, the currency with the higher interest rate appreciates versus the other one and the end of the quantitative easing has shifted the balance towards a strong dollar. We expect this strength to continue for the remainder of the year and into the next. On the equity side we expect more volatile trading as we move towards the end of the year in both the local and international markets.
What are the main risks, either upside or downside, to the outlook?
The good thing about investing across assets and markets is that a risk in one market is an opportunity in the other. We have already recommended to our clients that they reduce exposure to the local markets and increase it in the international markets, especially forex.
What is the best investment at the moment?
Long dollar versus euro and yen, but there are also other currencies investors could consider. For those who haven’t gone “long” already they can wait for a retracement at lower levels to establish positions. As I said, even though this is not something imminent, the market moves on expectations and the expectation is that at some point, the US will raise interest rates while Japan, Europe and China have no such plans in the near future. As a result, dollar strength is not only clear from a technical analysis perspective but also has a fundamental story behind it.
What was the best investment you were ever involved in?
We “shorted” the Greek stock exchange in late 2009 from 2,500, to the 550 level in mid- 2012 and bought a long position to take advantage of the subsequent rise to 1,000 points last year. The story is well documented in the Greek press and financial websites.
What was the worst?
A long time ago, in 1999 I was involved in the Greek and Cypriot stock exchanges before learning how to trade. During the crash of 1999, I lost all my capital. I turned this experience into a learning opportunity and moved into trading using technical analysis. I knew that there was a way to trade profitably and learnt technical analysis while working as a trader in forex in the banking sector. When I qualified in 2003, I then started successfully trading forex and bonds.
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