Technology has had a huge impact on the way we do things. The normal daily routine involves interacting with technology at various points. In financial markets, technology has changed many things. One of the key issues you will notice about trade in the modern day is how it is interconnected with technology. There are various tools used in trading platforms to enable traders to make sound judgments.
The following is a breakdown of exactly how technology has changed trade in the financial markets.
One of the key issues that have come as a result of technology is easy access to the market. Before smartphones and portable computers, the market was only accessible to dedicated figures and institutions. This is no longer the case though. Everyone with a simple device can be able to access the markets. In addition, the expanded accessibility has also come with a fair share of benefits. The market is for instance now more transparent than ever before. There is thus increased trust and the general trading landscape has become more demystified.
Another key issue that has come up due to technology is competition. This has particularly happened at the top tiers of the market where various brokers and institutions operate. Proprietary firms face ever-increasing competition from parties like brokers. Provides nowadays must have the latest tools in order to attract clients. Without proper technological backing, traders will not choose a particular service provider. This competition has also heralded an era of smaller providers. The market is no longer a preserve of the big players with huge amounts of capital. Smaller providers are emerging to offer services to a particular range of clients.
The market has also become quite flexible especially for traders. At the current day and age, it is possible for traders to access any kind of trading tools they want. If you want to rely on forex scalping strategies to earn your profit, you can be able to do so as there are a plethora of charts and tools available for you. In addition, traders are now able to trade from wherever they are and by using any tools available to them. This would not have been possible before. Traders are able to constantly gather market information and data from phones while they are traveling and also execute trades as quickly as they can.
Speed of Execution
When it comes to speed of executing trades, the current technology offers the fastest speed possible. Indeed, it is even possible to automate execution such that the accuracy of a particular trade is done down to the second. Such automation has made the work of dealers redundant. Faster execution of trades also means that no trader misses an opportunity in the market. The overall process of trading is thus much more efficient without many parties being involved between the trader and the market. This has allowed for saving costs and also for convenience.
Reduced Human Interaction
There is also reduced human interaction in the trading business. A few decades ago, the trader was someone who relied on extensive human networks to ensure that he is on top of the trade. This is not the case anymore. The market is dominated by technology where every aspect of trade does not need to be done with the help of human skill. The result of this has been a completely changed trading landscape. The traders of the modern day are a generation that is acquainted with technology and nothing else. This has both had positive effects for retail traders but also negative effects in the form of increased unscrupulous operators.
High-frequency Trading (HFT)
Another major factor that has come to define the market because of trade is high-frequency trading. As stated earlier, the speed of execution is now unimaginably faster than what was there just two decades ago. Studies have shown that HFT accounts for up to 73% of all trade in the US market. The ability to execute trades down to the microsecond means that many trades can be done over a period of time. This causes volatility and can also result in flash crashes.
From affecting how people trade to creating new opportunities, technology has had a tangible impact on financial trading. One thing that is common across the entire industry is how information has become accessible to all. Prevalence of information in the market is great but it can also be bad where misleading information dominates. Technology will definitely continue to affect the markets in even bigger ways in the future.