It has always been in a state of flux, given the nature of the industry itself. But with the rise of technology, the past decade has been especially tumultuous. Let’s look at some of the more disruptive changes in the trading landscape.
Trading used to be the domain of a very small group of people. Students would go to business schools and then try to land an entry-level trading position, working their way up. It was a high-risk, high reward kind of role for people who were utterly dedicated to the market.
This is no longer quite the case. Practically anybody can now open a trading account and the requirements are a lot lower. A certain amount of capital to get started, along with identity verification and a bank statement are usually all that is necessary.
There has also been a sleuth of robo-advisors that entered the market. While they may not offer much in the way of trading functionality, they do offer customers the choice of selecting certain stocks. Overall, there is far greater market access and much more information available.
There is a far greater variety of information available on trading fundamentals. The rise of YouTube has helped to facilitate trading tutorials which also assist in navigating complex trading platforms.
There are more educational resources on all aspects of learning how to trade. In addition, there is increased awareness with regard to the dangers inherent to trading and the fact that most people do not make a profit. It has become clear that in order to become successful, people need to give serious consideration to trading. There is no simple route to success and you need to learn all of the industry nuances.
Another advantage is that the data itself is more accurate and easier to access with the development of sophisticated APIs which can plug directly into exchange accounts. Traders can pull and analyze the information that they need more swiftly due to advanced software programs and applications.
Increased regulation has made it more difficult for trading scams to take place. There has been a regulatory crackdown and people are increasingly aware of Ponzi schemes and frauds that used to be rife within the industry, though they still do take place. After the 2008 crash, banks had to tighten lending standards so it was harder for people to actually gain the capital to trade and invest.
Moreover, professional traders in financial institutions were not able to place a large amount of capital on speculative products, due to the Dodd-Frank implementations. They were forced to justify their trades and place more of an emphasis on investment as opposed to speculation.
Traders can follow other traders in what is known as ‘social trading’. eToro was the first social trading platform to enter the market on a large scale. Before social trading, people would simply send emails in a closed group and they would copy each other. Social trading platforms completely democratized this marketplace so now traders can go onto sites and select who they want to follow.
Social trading is obviously not a set-and-forget scheme but it is certainly an innovative practice that has been used by many to add to their trading regimen. It is not a casual approach to trading but a useful means to enhance an existing trading approach.
Automation is the process whereby a winning trading strategy is implemented automatically by the software. Automation has a myriad of different benefits. A trader cannot be glued to the screen 24/7 and does not have the time to constantly look at all the different components of trade.
But with automation, he does not have to. He can simply set the conditions under which positions are to be placed. In this way, if an asset reaches a certain price, then a buy/sell position will be automatically executed, along with the appropriate stop loss or take profit functions. Automation needs to be carefully reviewed and managed, but it is certainly a lot easier than implementing a manual approach. There is too much data, and time is a precious commodity.
One step further than automation are trading bots. There are pre-packaged programs which have been extensively tested with a track record of success. It is possible to rent some of these trading bots from specific platforms. You will need to do your own research on these bots, but they can increase profit margins if used intelligently.
The Introduction of Cryptocurrency
In more recent years, we have seen the rise of a new asset class – cryptocurrencies. This class is hard to define due to its nature. Cryptocurrencies are also notoriously volatile, which can be a massive advantage to traders who understand how to ride such waves. Most profits are made from volatile events, not stable conditions.
There are now hundreds of cryptocurrencies that new traders can investigate. The most common trading pair with the largest volume is BTC/USD. There is also an increasing number of stablecoins. These are digital tokens that are backed on a one to one basis with a stable fiat currency, such as the Euro or the US Dollar. This has served to bring a level of stability to a volatile market, though some might question the purpose of stablecoins.
Today, crypto trading evolves. From traditional exchanges like Binance and CEX.IO, it moves to terminals like Kattana and Superorder. The latter is a new cryptocurrency trading platform that offers bots for rent as well as a novel approach to strategy building, with a ‘LEGO’ model that chains events together. This provides a new way for traders (experience and new) to visualize their entire approach. This visual builder is one of the latest innovations in the world of trading and is a new paradigm.
The days of excel spreadsheets and one-dimensional trading screens might soon be over, as people realize the advantages of a more streamlined and visual approach to trading.