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Navigating FX and CFD Trends: Insights from David Kimberley

What initially drew you to specialize in writing about the finance industry, particularly Forex and CFDs?

It was really by chance. I was on track to work at Accenture but then moved abroad and ended up becoming a journalist, from which point things snowballed. In terms of why I still do it today, it’s a fun industry to write about as there’s always something interesting happening and it seems to attract eccentric people from all over the world. I remember Matt Levine writing that crypto is a mix of human folly and human ingenuity - I think that applies to the CFD world too.

Can you describe the evolution of the FX and CFD markets from when you first started covering them to now?

I would probably say regulation. At least in Europe, the industry is now much more heavily regulated than it was when I started out. But like I said, there is always something new happening. The big trend now is funded trader programs. A couple of years ago everyone was doing commission-free stocks and adding crypto. Prior to that a lot of companies only had FX, whereas now most brokers offer pretty much every asset class.

What are your go-to resources or methods for analyzing and predicting FX and CFD market trends?

It’s really varied. A lot of stuff is theoretical - so looking at the way a broker functions and wondering, ‘ok, given X, would it be the case that Y happens’ and then going down that rabbit hole. Otherwise speaking to people, reading day to day news, looking at company reports. Some of the best articles I’ve done have come in really random ways as well. But that would be revealing my secrets.

DavidKimberley2

Which FX or CFD market do you find most intriguing for trading, and what factors contribute to this preference?

My current job means I can’t trade for regulatory reasons and I wouldn’t classify myself as a trader either. Still, I run a demo account where I make trades from time to time just for fun. I would say any asset which is mispriced on a fundamental basis but where there is an obvious catalyst for it to revert to its ‘true value’ over a short time period. So if you look at UK equities, they are undervalued in my view, but it’s hard to see a short term catalyst that would change that, bar M&A activity for individual stocks - something that’s very hard to predict. Contrast that with the shekel, which recently got hit very hard but where it was likely to bounce back quickly. That was a good buy opportunity. In contrast, if you are going long UK equities, you’ll just get hit on swaps or margin called before you make any money as you may literally be holding for years, so it’s probably better to just buy the physical assets.

Can you discuss a trading myth that you feel needs to be debunked?

It always bugs me when brokers say something like ‘we have indices, stocks, commodities and CFDs’ - they are all CFDs!

In your view, what is the most common and critical mistake that novice traders make in the FX and CFD markets?

A family friend was a broker CEO for a bit and I remember him saying that most people trade in the right direction but lose money because of technicalities. I have not interacted with too many newbie traders but I would say that’s accurate. A lot of people don’t get the impact that simple things like spreads and swaps will have on them. It’s like the UK equities trade, you may be right directionally but the mechanics of a CFD mean it’s unlikely to be a good trade to make. To give a different example, someone I spoke to recently was weighing up opening a spread bet on a UK small cap. I checked the spread and it was literally double digits - so he may have been right that it was going to pop but the spread was so insanely wide that it was redundant.

What role do you believe artificial intelligence and machine learning are playing in modern FX and CFD trading?

I have generally been sceptical about AI as I think it’s the next thing for tech to hype so that they can raise money and/or keep valuations high. But a couple of things recently have changed my mind a bit on this. I have seen a very cool product for compliance, which makes use of AI - really mind boggling stuff. On the traders side, companies which have simplified the creation of trading strategies via GPT-esque prompts are doing extremely well, so clearly there is demand for their products and it’s having an impact on that front.

What emerging markets or currencies do you see as having significant potential for traders?

The Mexican Peso is one at the moment because it has become this conduit for re-exporting Chinese goods to the US, which seems to have basically made the currency have its strongest period vs the dollar in decades. I also think Vietnam is interesting. In 2020 the government introduced e-KYC for stock broking accounts and the number of individual investors there tripled to over 7m after that. That helps market liquidity, which then means Vietnam could be in the EM indices, plus the country is becoming a new exporting hub. So lots of interesting things are happening there.

Many thanks to David for sharing his insights. You can explore more about him on his website.

(Please note: This is not an endorsement of David's services).