In this article, we’ll examine the top trading ideas in 2020. Any casual internet search will come up with dozens of trading ideas. We have whittled down a list 10 finalists (in no particular order), which in our opinion represents the best trading ideas of 2020. The list includes forex ideas, as well as trades based on commodities and equities.
The global economy has taken a beating in 2020, as the Covid-19 pandemic has paralyzed economies across the world and caused massive upheaval. Key economic sectors, such as manufacturing, services and housing have all reported sharp declines in the first quarter of the year. Consumer spending, a key engine of economic growth, has fallen off sharply, as nervous consumers are holding tight to their purse strings, unsure of what tomorrow will bring. Millions of workers are on unpaid leave or have lost their jobs, and business and consumer confidence have evaporated.
There may be plenty of gloom and uncertainty in the air and on the airwaves, but for traders, the “Corona era” can be viewed as a unique opportunity to trade and profit. Global stock markets took a huge hit in March, when the pandemic spread to Europe and the United States, but have since recovered much of these losses. The currency (FX) markets have been marked by high volatility, which is a positive trading environment as it provides trading opportunities.
In response to the severe economic conditions caused by Corvid-19, central banks have co-ordinated their monetary policy and slashed interest rates close to zero. This means that fixed-income securities such as U.S. Treasury Bills decrease in value and are less attractive, while at the same time there has been an increase in demand for equities (stocks) and commodities such as gold.
Types of Trading
Before discussing trading ideas, let’s review the different types of trading. In order for a trade idea to transform into a reality, we need to choose a method (or combination of methods).
The most popular financial instruments to trade on the financial markets include equities, commodities and the currency (FX) markets. Before looking at particular assets which represent excellent trading opportunities, let’s take a look at the different types of trading and suggested trading strategies.
There is no “best method” to trade – one or more of these methods may be most suitable for your specific trading idea, depending on your temperament and tolerance for risk. These methods are suitable for any types of trades – these include forex trading ideas, or trades involving commodities or equities.
Scalping
A scalper will make dozens or even hundreds of trades each day, with the goal of “scalping” a profit from small price changes. This type of trading demands strict discipline because the trader must adhere to a strict exit strategy.
Momentum Trading
These traders look for stocks that are showing significant movement in one direction, with high volume. The momentum trader will try and “ride” the momentum in order to make a profit.
Technical Trading
Technical trading involves identifying trading opportunities in price trends and patterns which appear as graphs on charts. These traders examine indicators on the graphs, such as support and resistance levels or moving averages, looking for buy or sell signals.
Fundamental Trading
Fundamental traders will trade a company stock based on events which are specific to a particular company, such as earning reports or acquisitions. Currencies can be viewed as a nation’s “national stock”, hence, fundamentals in the FX markets would include economic and political events affecting that country, which could affect the exchange rate.
Swing Trading
Swing trader will hold a trading position for longer than a single trading session, for up to several months. The goal is to hold onto an asset in anticipation of a price move which will yield a profit.
Tips and Strategies
The leap in technology in recent years has meant that traders can trade from the comfort of their home and trade the markets on their computer or Smartphone. The internet provides a trader with unlimited access to broker services as well as information about trading on the financial markets. What has not changed over time, however, is the requirement for a trader to show discipline with his trading idea and stick with a strategy during the ups-and-downs of trading (yes, rest assured that there will be some downs along the way). Here are some tried-and-true suggestions which should be implemented in every trade:
1.Define Your Goals and Trading Style
Trading ideas should be treated like any journey. The traveler needs to now what is the final destination and how he plans to get there. As we have discussed above, there are various methods for trading financial instruments. Once you have clear goals in mind, you can choose a trading method (or methods) which will best meet your goals.
What is your risk tolerance? Are you comfortable going to sleep with an open position in the market? A good rule of thumb for risk tolerance is to avoid any moves that will keep you up at night. A trader who is comfortable with open positions might prefer fundamental trading, while someone who prefers to close her positions at the end of the trading session may find scalping a more suitable method.
2.Choose a Suitable Broker and Trading Platform
Type in “trading broker” on Google and dozens of sites will pop up on your screen. In order to ensure that your funds are secure, an online broker should be registered with the regulatory bodies of that country – in the U.K., the relevant regulators are the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA).
Most brokers will offer a trading platform that you can use on your smartphone, but not all platforms are created equal. A good platform will have user-friendly technical and charting tools and a news feed. As well, a broker should be able to execute trades at the price you requested (or extremely close to it) and provide competent customer service. Bottom line? Make sure you have “a good broker with an excellent trading platform”.
Choosing the right broker can be a daunting task, but the Platinum Trading Academy can help you whittle down the vast number of brokers. We’ve reviewed dozens of brokers and trading platforms and come up with what we feel are the 12 best FX brokers.
3.Entry and Exit Strategy
It is essential to have an entry and exit strategy before you make a trade. Are you looking to jump “in and out” or are you in for the “long haul”? Stick to your guns – don’t fall into the trap of throwing your trading strategy out the window because of unexpected moves in the market.
4.Education, education, education!
The old adage of ‘knowledge is power’ rings true in the trading arena. The more you know and learn about trading and the financial markets, the better equipped you are to make trades which can yield profits. Consider taking a course in trading, such as online trading courses from Platinum Trading Academy, which has helped thousands of individuals learn how to trade on the financial markets.
Top 10 Trading Ideas
The Corvid-19 pandemic has resulted in shortages of medical supplies and personal protective equipment, with countries and businesses frantically combing the globe to obtain these supplies. As well, many firms are actively working on a vaccine for Corvid-19.
1.Johnson & Johnson
Traded on: NYSE
The U.S. pharmaceutical giant started is pouring huge sums into discovering a vaccine for Covid-19. In conjunction with the U.S. government, more than $1 billion has been committed to-fund vaccine research, development, and clinical testing. Johnson & Johnson has an established record developing vaccines, such as the vaccine for the Ebola virus.
The company expects to begin a phase-one clinical study in September 2020 and is aiming to have a vaccine for emergency use ready in early 2021. Ultimately, it is aiming to provide a ‘global supply of more than one billion doses of a vaccine’.
This blue-chip, quality stock started the year 2020 at $145.97. The stock dropped to a year-to-date low of 111.14 in late March, but has since recovered all of these losses – currently, the stock is trading at $147.30. Johnson & Johnson has significant upside if it discovers a vaccine. It is an excellent choice for a trader who is prepared to hold onto the stock as research into a vaccine continues.
2.Moderna
Symbol: NDNA
Traded on: NASDAQ
This biotech company has seen its share price soar due to its front-runner status in the race to find a vaccine for the Covid-19 virus. The company has not generated much revenue, but that hasn’t deterred investors, who have snapped up the stock. Moderna has jumped 190% since the beginning of the year and is currently trading around $58.
Moderna conducted a Phase 1 clinical trial in March, followed by a Phase 2 in May. However, the company is at least a year away from having any of its products hit the market. Still, investors like the fact that the Trump administration chose Moderna as one of just five companies most likely to produce a successful vaccine for Covid-19. Moderna faces still competition in the race to reach a vaccine and this stock is not for the risk-adverse. At the same time, if Moderna does produce a vaccine, the windfall for shareholders will be huge indeed.
3.Quidel
Traded on: NASDAQ
Quidel is a diagnostics company that specializes in rapid testing for a variety of diseases, including the Covid-19 virus. According to MarketSmith.com, Quidel stock ranks as number 20 out of the 150 fastest-growing stocks. Sales growth has been strong and the earnings per share have climbed at an annual rate of 98 percent.
The stock was trading at $74 at the start of the year and has almost doubled in value, as it currently trades at $156. In May, the stock climbed as high as $208. Given the huge demand for corona testing in the U.S. and worldwide, Quidel shares have significant room to climb.
4.Gold
Gold is a traditional safe-haven asset, as investors tend to seek the safety and stability of the yellow metal in times of crisis. The global economic meltdown has sent gold prices sharply higher, with the metal climbing an impressive 16% since January 1. The stock market rally has not hampered demand for gold, which climbed as high as $1765 in May, its highest level since 2012.
A correction in gold prices is a possibility once economic conditions improve. At the same time, a rebound in economic activity is likely to cause inflation, which could raise the price of gold, since investors often purchase gold as a hedge against inflation. Whatever one’s view on which direction gold will take in the coming weeks and months, gold will continue to fluctuate, making it an attractive asset to trade.
5.Platinum
For traders who are looking for a commodity that shows volatility but has less of downside risk than gold, platinum fits the bill. Platinum is not considered a safe-haven, so it has not acted in the same way as gold, which has shown sharp gains in 2020. The metal started the year at $980 and fell sharply in March, dropping to a low of $586. Platinum has since recovered much of these losses and is currently trading at $827.
6.Australian Dollar
Looking for a forex trade idea?
The Australian dollar is considered a risk currency, and its tendency to fluctuate makes it a popular trading opportunity. The Australian dollar is one of the five most frequently traded currencies in the FX market. The primary reason for the huge demand is the fact that the Australian economy is particularly dependent on the export of commodities, and the unpredictability of the commodity cycle often translates into significant volatility for the Australian dollar.
As well, Australia’s largest trading partner is China, so when Chinese economic indicators show strong movement, the Aussie is particularly sensitive. The Australian economy has declined to the Corvid-19 pandemic, but surprisingly, AUD/USD has been red-hot, climbing 12.7% in the second quarter of 2020. The currency is likely show further volatility in the weeks to come.
7.Nasdaq Index Fund
The Nasdaq 100 is the third most followed equity index in the U.S., after the Dow Jones and S&P indices. The Nasdaq provides traders with diversified exposure to over 3000 companies in the non-financial sector. Some of the biggest companies in the world trade on the index, including Apple, Facebook and Amazon. Trading an index fund is less volatile than trading individual stocks, but traders should keep in mind that the index is only as stable as the underlying index. Thus, trading in an index fund entails considerable risk.
The Nasdaq started the year at 9092 points and like the rest of the equity markets, had a miserable March, falling to a low of 6860 points. Since then, however, the index has fully recovered and is currently at 9924 points. With the U.S. economy showing signs of recovery, I expect the Nasdaq to continue to move higher.
8.Amazon
Traded on: NASDAQ
The corona outbreak has led to most retail stocks taking a tumble, with the exception of the companies in the health care sector. However, a notable exception has been Amazon, a multinational giant. The company has taken over 38% of the e-commerce industry in the U.S., and this sector is likely to grow even further, as consumers spend less time outside and at work and more time at home. Amazon started 2020 at $1898 and slipped to a low of $1676 in March. Since then, Amazon shares have enjoyed strong growth and are currently trading at $2524.
9.Innovative Industrial Properties
Traded on: NYSE
Innovative Industrial Properties owns facilities for the cultivation of medical-use cannabis and leases them to licensed growers in the United States. The company does not produce marijuana or any related products. At the start of 2020, shares were trading at $73. Share prices fell in March to a low of $51, but have rebounded nicely. Currently, the share price stands at $95. With more U.S. states expected to legalize cannabis, demand will increase and the relatively low share price makes the stock an attractive trading opportunity.
10.Dexcom
Traded on: Nasdaq
Dexcom is another company in the healthcare sector that is an attractive buy. The company manufactures and distributes continuous glucose monitoring systems for diabetes patients. Share prices have shown excellent growth this year and did not collapse in March, like most retail stocks. The company started the year at $219 and touched a low of $198 in March. Currently, shares are trading at $368.
Summary
This article presents the top-10 trading ideas for 2020. Investors have a dizzying amount of choices to choose from. The trick is to settle on an asset that you feel comfortable with. A forex trade idea such as AUD/USD promises plenty of volatility, while a commodity trading idea such as gold acts as a safe-haven in times of crisis. Once you determine which trade idea you prefer, choose a trading method, remain disciplined and the sky is the limit!
Hopefully, you have enjoyed today’s article. Thanks for reading!
Have a fantastic day!
Nisha Patel
Live from the Platinum Trading Floor.