How Technology Has Enhanced Trading Methodologies Over the Years
Technology has also empowered us to unlock new efficiencies across different layers of trading both directly and indirectly
It’s not a distant past when trading used to be an open outcry on the stock markets. Now, as quick and easy touches of buttons come to fore, this age-old practice is now a part of our history textbooks. Technology, as marvellous as it is, has made us a lot efficient than we were ever before.
However, the role of technology goes way beyond mere digitization of the trading activity. It has also empowered us to unlock new efficiencies across different layers of trading both directly and indirectly. If you are a stock market enthusiast, here are some of the ways in which technology has transformed the modern-day trading.
Data: The mother of all information
Do you know that when the entire US market was under free-fall back in 2008, a few investors such as Michael Burry, FrontPoint Partners, Brownfield Capital, and so on booked profits worth billions of dollars? Yes, their story has also been featured in Hollywood’s critically-acclaimed biographical drama The Big Short. But how did they do it? They simply paid attention to the detail.
If you’d ask seasoned investors, they will tell you that insights differentiate a greenhorn from a proficient trader. This, by extension, also applies to their trades. Thankfully, technology has brought about a phenomenal difference in this regard today. It has democratized data and made it accessible by everyone. So, today, you don’t have to call your broker to have a deeper look at a company’s financials. You can screen your entire stock—including valuation, sales growth, ROE, ROCE, etc—and conduct peer reviews by simply logging on to an online platform.
The democratization of data has also paved the way for something ingenious. It is gradually eliminating the need of doing the stock research in-person. You might have heard about Big Data and artificial intelligence, right? Well, both of them are rapidly penetrating the trading landscape at present. They transform our trading experience by enhancing the scope of analysis as well as accuracies. For the uninitiated, Big Data analytics involves analysis of voluminous data moving at a very high speed to extract meaningful insights. Meanwhile, artificial intelligence enables the programme to establish relevant correlations without external programming. In a nutshell, they do all the analysis and extend you simple pieces of advice for quick perusal.
Though robo advisories are still in their initial stages, some of them even analyze billions of data points before extending an advice. How deep their analysis is going to be in the future? Food for thought.
Automated trading platform
When the technology can figure out that which stock or commodity we should invest in, then why the hassle of choosing? Yes, this is precisely the reason why we also have automated trading platforms today. Modern technology has given birth to novel trading approaches such as robo trading and algo trading wherein a tech solution manages all of your investments. All you have to do is choose the asset class for the same.
Onboarding process: From zero to one
Earlier, a key challenge experienced by interested stock investors was the time taken by them to hop onto the trading floor. Trading needs you to have a bank account, a trading account, and a demat account. Back in the day, it could take days, and even weeks, to open all of them before you could start trading. Today, however, the entire process can be summed up in less than an hour, something which couldn’t have been possible without the aegis of technology. It is empowering more retail investors to join the trading bandwagon seamlessly.
We stand at a crucial juncture today. It is because we can see the fading lines between physical and digital worlds in front of our own eyes. As interesting as this transition is, it has also allowing us to tap the opportunities offered by our burgeoning digital ecosystem—one trade at a time.