Technology plays such an important role in our everyday lives that we don’t always recognize the impact it’s having on the tasks we complete and the decisions we make on a daily basis. But for those involved in trading and investing, the presence of cutting edge technology is hard to ignore.
5 Ways Technology is Changing Investing
If you were to study a snapshot of the investing world 25 years ago and compare it side-by-side to a snapshot of the investing industry today, the two would look nothing alike.
Today, trading looks nothing like it did at the end of the 20th century. While markets and investing behaviors have changed, the primary evolutionary catalyst in this industry is technology. Technology has dramatically changed the investing world for the better.
Let’s take a look at a few specific developments:
1. Enhanced Information Access
“The wide availability of information is perhaps the biggest benefit that the Internet has had on investing,” CFA Ryan Fuhrmann mentions. “Prior to the Internet, the retail investor’s best bet was to head to the local library to read financial literature, and research companies and securities such as stocks, bonds and mutual funds.” Other options included contacting companies directly and paying for them to send you a financial report – something that was costly and time consuming.
Today, investors have access to more information than they could ever need. This includes company reports directly from the Securities and Exchange Commission, financial documents, past trading reports, and analysis from experts and gurus in the industry. It’s a whole new ball game.
2. Fewer Barriers to Entry for Investors
It used to be that you needed to have some sort of connections or expensive system in place to competitively invest. Thanks to the growth of the internet and accompanying tools, this is no longer the case.
The rise of online trading platforms – such as RJO Futures – has reduced the barriers to entry and allowed traders to directly view market activity, place orders, and track orders on their own. This means anyone with the time and desire to invest can get involved without the need for an intermediary.
3. Fewer Barriers to Entry for Providers
It’s also worth noting that there are fewer barriers to entry for providers, as well. Smaller companies can essentially private label someone else’s platform and use it to serve the needs of their clients. This creates more healthy competition in the marketplace and providers investors with more choices in regards to which companies they choose to execute trades with.
Eventually, it’s possible that we’ll see an investment landscape where there’s a direct-to-trader setup – meaning traders don’t even need to work with providers. This would be the ultimate step in the evolutionary process of the industry.
4. Increased Freedom and Flexibility
One of the top technological developments in the industry over the past five to seven years has been the rise in mobile trading tools and platforms. Not only do traders now have access to robust systems at their desks, but they can also monitor investments and execute trades on the go.
“I’m not tied down to a trading platform that is desktop only. I can trade from my phone or tablets. We now have charting packages that are accessible through internet browsers. With this I can analyse the market while having coffee in the morning and ready to trade once I get to the office,” trader Vito Henjoto says. “This makes me a more efficient trader with information ready at any time without compromises.”
Traders all over the world have come to appreciate the convenience of mobile trading. While nothing beats being able to sit in front of multiple computer screens and meticulously analyze data before making a move, it’s nice to be able to keep track of things independent of any location.
5. Faster Trades
“Many still think of share trading as an activity that takes place on the floor of the stock exchange, with human intervention; images of traders punching in orders on screens on the floor of the New York Stock Exchange are part of the daily diet of business television viewers,” says Jeremy Grant of Financial Times. But the reality is that the image of a crowded trading floor is something the NYSE puts forth primarily for marketing purposes – to maintain brand visibility.
Today’s trading takes place almost exclusively via automated platforms. And part of the reason this works so well has to do with the speed at which trades can be executed. Grant points out that platforms can process trades in as little as 16 microseconds. For perspective, he notes that the human eye takes 300 milliseconds to blink – and one millisecond is made up of 1,000 microseconds. Pretty fast!
Speed is the name of the game today and we can expect to see platforms become faster and more streamlined. With the rise of big data and artificial intelligence, it’s only a matter of time before smart, automated, predictive trading becomes the new trend.
Adding it All Up
Clearly, technology is playing a very influential role in the evolution of the investing industry. As things currently stand, investors and traders have a number of distinct advantages over those who came before. Between access to information, limited barriers to entry, increased mobility, and faster processes, there’s never been a better time to be an investor.
This post is part of our contributor series. It is written and published independently of TNW.
This post is part of our contributor series. The views expressed are the author's own and not necessarily shared by TNW.