Technology has crept into every imaginable business realm today. Every realm from the transportation industry to the service industries have been affected by technology. Today, dozens of tech companies cross the $1 billion valuation mark every year. As an industry that relies heavily on data, the financial realm has possibly seen the highest rates of technology adoption.
Trading processes today are not just handled by machines but the entire information chain is defined by tech. Automation is one of the many forms of technology that are now used in trading. Some bots handle data and make decisions on behalf of traders all across the market. To understand just how much technology has changed the modern trading market, we have to look at various learning points. The following is a breakdown of the main ways that technology has changed modern trading.
As stated in the introduction, automation is a major aspect of tech that is prevalent in the market today. Not only do machines take care of the routine tasks associated with the business, but they have also resulted in a new phenomenon – automated trading. So, what is automated trading? In basic terms, it is the use of programmed machines to execute tasks on behalf of a trader. Automated trading systems work on the premise of some established rules. The machines are programmed to make decisions when a particular set of conditions is triggered. In the realm of trading, automation handles different levels of the trading process. Over 80% of trade orders today are automated. Some machines are capable of handling the entire trading process including entering and exiting trades. Some of the tasks that automated trading systems can do include:
Communicating with the broker
Handling trade entry and exit points
Starting and ending trading sessions
As you might expect, there are pros and cons associated with automation. The main advantage of automation though is the removal of emotion during trading. Many traders tend to fail because they have become too passionate to focus on what is going on in the market. Automation however also can fail as machines are susceptible to errors.
Extended Access to the Market
Technology has also made it possible for traders to access the markets for longer durations. Nowadays, 24-hour access to the market is possible because of technology. While the individual markets themselves do not run for 24 hours, a trader can work with time zones to ensure that they have access to the global market which is always running at different time zones.
To this extent, shrewd traders can benefit from Asian Markets during the day and European Markets at other times when markets in Asia are closed. This unlimited access to the market has resulted in a fast-paced investment realm where the opportunities to make profits are many.
Technology Has Heralded New Styles of Investing
Financial markets have also evolved significantly due to technology. Today, all kinds of investors and traders can participate in the markets. Some traders work as part of organizations and team-work is now quite common. The collaboration between traders is enhanced by the fast connectivity that is provided by technologies like 4G.
The scale and scope of the market have thus changed drastically. Today, crowdsourcing and partnering to establish trading firms is a norm in the market. The new forms of investing are very rewarding, but they also come with heightened risks. Considering how the number of market participants has increased in recent years, the lucrative part of the market has only been left to skilled traders who have the best strategies.
Mobile Trading The usage of mobile phones has increased significantly. Over 3 billion people now use smartphones around the world. Smartphones can do most things that a computer can, including trading. Mobile trading has thus emerged as a form of trading by itself under the influence of technology. Today, a plethora of trading apps are available for budding traders. These apps provide all the information needed to venture into the market. Modern trading apps also allow traders to do everything they might need from the palm of their hands. Mobile trading accounts for 40% of trade, and this number is likely to grow in coming years. Technology has thus influenced trading massively in recent years.
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