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Tuesday, May 18, 2021

How Does Technology Influence The Financial Trading Industry?

Technology has changed lots of things we do. Today there are more internet-based disruptors than ever before. However, one of the fields that has been influenced the most is financial trading. Unlike other sectors, financial trading existed before the internet. For years people used to trade from the pit. Then the phone happened and it facilitated the trading quite a lot. Nevertheless, today financial trading is open to everyone and the only reason for this is the technology. Let’s find out more!

The historical analysis of how technology has influenced the financial trading industry over the years.

How technology has influenced financial trading industry
Stock Trading Indices:- How much has the advancement in technology affected the financial trading industry?

Currency market

You will be amazed, but actually the largest transactions don’t take place on the stock exchanges. Foreign exchange market is nearly 10 times bigger than all of the stock exchanges combined, if we could by the volume. However, this market has only been open to institutional traders until late 80’s / early 90’s (depending on your location). However, thanks to various third party liquidity and software providers, today there are thousands of Forex brokers servicing retail investors. Actually, with products of such companies as Leverate (a full-fledged software as a service company), it is now possible to start-up your own FX brokage for the price of $20,000-$30,000, while just a decade ago one would expect to pay roughly 10 times more than that.

HFT – High Frequency Trading

Next to the accessibility, trading has changed quite a lot in its basic form. It is no longer about gaining $100,000 profit on a single trade. Rather than that, it is about gaining $10 profit on 10,000 trades. With high frequency trading, one is designing a working algorithm that is supposed to make very tiny profits on every deal, hosting this algo as close to the exchange’s servers as possible, and maintaining the whole process.

Even though this activity can be quite profitable, it is pretty expensive and is not recommended for the beginners. From the one point, you won’t really be able to benefit from HFT unless you pay a decent amount of funds for hosting. From the other point, even if you spend a fortune to host as close to the trading servers as possible, you still may not have a profitable script.

Robo Advisory

Nobody really likes banks. And banks know it. Hence, when it comes to planning one’s investments, it is likely that the person will trust an advisor from a bank. This is why such a new fintech field as robo advisory is blooming now. Instead of having a few financial analysts checking the charts and, hence, providing their clients with investment decisions, robo advisory removes all of the human factors from investing. With the help of trading robots you will be informed about various possibilities on the financial market and could choose whether you want to invest or not.

The final thought

Over the course of the last 20 years, financial trading has become accessible by nearly everyone, despite the location, well-being or even the speed of the Internet. Also, within this decade there have been quite a few trading platforms launched, which today offer a great scope of features to all types of traders. However, it does seem like there will be even more progress in the future. Most of the importance today is placed to make the millennials invest in an easy way. Can you imagine Siri or Snapchat for investors? Well, it certainly can be a reality in less than 5 years from now.

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