Coronavirus attracted the inexperienced. In Australia they lost PLN 1,8 billion in a week

About how the best play extraordinary situations on the financial market, dozens of books, films, and even series and hundreds, if not thousands of articles were created. No wonder many people wanted to feel like their heroes and make millions. And some have earned. Although it can be safely assumed that history has come full circle this time too. The rich have made, the poor have lost. In Australia, their portfolios shrunk by PLN 1,8 billion in a week. Mainly due to the largest decreases in history oil prices.

A summary of market achievements of retail traders was presented by the financial supervisor in Australia ASIC. The statistics relate to the period between 16 and 22 March 2020. They show that individual traders lost USD 428 million during this time. The indicated week was characterized by the greatest variability during the period of increased movements caused by the coronavirus pandemic. The data may shock, but they are still underestimated, because they come from 12 brokers who took over 84% of the market. It can be safely assumed that the overall losses of individual investors are even greater.

Inexperienced traders have lost the most

In the summary we read that as many as 5,5 thousand people (or bills, because one person may have several accounts with a broker) not only lost all the money invested, but ended up with a negative balance. More people than usual tried their strength on the market of raw materials, currencies and betting on the decreases or increases of stock indexes. What's more, many of these people thought they had enough knowledge to engage in day trading. Effect?

“Trading frequency has risen sharply, as has the number of securities traded during the day. The holding time has decreased significantly, which indicates an increase in short-term trading and day trading activity. In addition to the increase in turnover, there has been a sharp, triple or even fourfold increase in the number of new retail investors in the market, as well as a marked increase in the number of reactivated inactive accounts " - we read in the ASIC report.

Full ASIC report (PDF)

220% larger swap than last year

The exact number of bills on which the balance has dropped to zero or below is 5448 accounts. This represents 2% of all active accounts at this time.

How did they do it? Not only by unsuccessful investments, never setting stop losses and no quick cut losses. A significant increase in the cost of maintaining a position was also key. For oil, it increased enormously and if someone suffered a loss and waited for it to make up for it, then some brokers lost even about 20 euros on each contract overnight. In total, swaps in March 2020 were 220% larger than in the same period of 2019. In extreme cases, this meant the cost of 60% of the position held overnight.

“The higher probability and the impact of unpredictable news and events in the offshore markets overnight only increases the risk. ASIC is therefore particularly concerned about the significant increase in retail investor turnover in complex, often high-risk investment products. They include highly settled products traded on a stock exchange, but also contracts for exchange rate differences " - writes the regulator in the report, but it is hard to expect that such warnings will reach individual investors.

KNF: we will evaluate later

While the Australian regulator flooded the market with an avalanche of detailed data and information, Polish traditionally maintains stoic calm. Polish Financial Supervision Authority she just announced in a statement that due to the COVID-19 epidemic, it is postponing the deadline for assessing the effects of product intervention on CFDs to the second quarter of 2021.

The intervention was introduced on 01.08.2019/XNUMX/XNUMX on Forex market to protect individual investors from losses, i.e. reducing leverage and hedging against a negative balance. Due to the lack of the PFSA report, we will not find out whether most investors have benefited from it.