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Read More >How Technology has Changed Investing
The worlds of both investment and technology have drastically changed and so has the way we look at managing our wealth. Let's take a look at the different ways in which technology has changed our investing experience.
Publish Date: May 06th, 2019
By: Sandhya Kannan, Head – Content
The advent of technology has a profound impact on almost every aspect of our lives. Technology has drastically changed the way we live, communicate, and work. Technology also has a major impact on the way we invest! Yes, the rise of technology has completely changed the face of investing today. The rapid rise of online trading has encouraged many people to begin investing in the stock markets. Now, anyone with a computer/laptop or smartphone and an internet connection can register with an online broker and start trading. Technology has brought many changes to our investing experience. Let’s look at them!
Investing & Technology- Then and Now
Before the advent of technology, if you wanted to make a trade in stock, you would need to call your stockbroker to place an order. The commission rates for buying and selling stocks were fixed. These rates used to be quite high because of a lack of information.
With an increase in the use of computers in the late 80s and early 90s, online trading platforms emerged. The better use of computer ushered flows in high-frequency trading, forex trading, etc.
As technology continued to improve, new products were created like Exchange Traded Funds (ETFs). Today, investing has become much easier than it used to be before. Now-a-days, investors can get information about any stocks, funds, investment options, brokerage firms, fees, etc, through the web.
One can open a trading account online in minutes. They can fill the form online, scan documents in seconds, deposit funds in a few minutes, and start trading! It has become this simple! Furthermore, most brokerage companies have a mobile application so that investors can make and track their investments from anywhere at any time.
Learn about the history of the stock market here
Let’s discover more ways of how technology has changed investing.
Online Trading
Online trading has highly impacted investor's experience in trading. Gone are the days where investors had to call brokers to place a trade. Today, online trading has opened a direct connection between investors and their trades, where investors can execute orders on their own.
Many brokers have developed their online platforms and mobile applications that provide investors with information about current stock prices, alerts, latest news, etc.
Social Media
In 2017, there were about 2.46 billion social media users, and it has been estimated that this number will go up to 2.77 billion by the end of 2019. With such high engagement, social media also has had a huge impact on investing. Investors can track many things through social media. This includes news, stock performance, global market trends, economic stats, and many other things. There is no doubt that social media is the quickest access to breaking news and can provide important updates for traders and investors.
Understand how to place an order for IPOs online. Read here.
Circuit Breakers
Circuit breakers are employed by the stock exchanges as a means of safeguarding against panic selling. It also controls extreme volatility, in particular stocks. Technology has helped seamless functioning of circuit breakers in the stock market.
The circuit breakers trip when pre-defined thresholds are reached, for instance- if the index reaches 20% of its limit, then the stock trades are automatically halted for the remaining part of the day. In short, circuit breakers temporarily stop trading when prices become excessive. These systems are designed to control panic selling.
Electronic Stock Exchange
Electronic trading is considered to be super fast, efficient, and accurate. Multi-billion dollars worth of trades in equity markets are carried out worldwide every day using electronic trading. With the electronic stock exchanges, traders can do the legwork that was once done in a crowded room from the comfort of even their homes.
NASDAQ first launched the electronic stock market and traders were allowed to post bids and make offers digitally. Today, most stock markets are electronically-traded exchanges, where buyers and sellers meet on a virtually created platform to exchange different kinds of financial securities like bonds, stock, commodities, currencies, and derivatives.
Terminals
Terminals were first introduced back in the 60s, but today they are advanced with the advances in technology. There has been a vast improvement in the amount of information that is available to traders. They offer cloud-based software that can be uploaded onto any type of device. Investors now have secured networks and work in real-time to deliver up-to-date pricing and market updates. Investors can quickly view the latest statistical reports and market news. Computerised trading terminals allow investors to analyse key market data in just a few seconds.
Algorithms
An algorithmic view of analysing stocks is perhaps one of the most important factors driving a stock price today. The computer-based algorithms use programmatic rules to analyse trading, timing, volume, and other factors at a rapid rate. It is humanly impossible to work in such a large frequency of orders. Such a system gives buyers the power to execute orders quickly.
High-Frequency Trading
High-Frequency Trading, also known as HFT is an automated trading platform used by institutional investors, hedge funds, and investment banks to transact a large number of orders at high speed. Nearly 52% of daily trading volume are represented by HFT. HFT platforms, allow investors to execute millions of orders and scan multiple markets and exchanges in just a few seconds.
Conclusion
There is no doubt that the technology has brought many new ways of investing. If we look into the future, there would be many more seamless routes that could be introduced in investing. Big Data will be used for measuring market psychology, and Artificial Intelligence will be used to take investing to the next level. Thus, the world of investing will continue to evolve and become more sophisticated ways as technology continues to advance!
Also read:
- Beyond mere lip-service
- 5 Important numbers to know about stock markets
- Invest in Initial Public Offering (IPO)
- Mutual Fund Research
- What Yoga teaches you about money and investing
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