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March 27, 2020

How Technology Has Transformed Stock Trading

Technology has changed the world entirely over the past few centuries. Unending technological innovations have made it easier for us to carry out various activities. In virtually all aspects of our lives, science and technology are shaping how we live. Stock trading is not left behind. Technology has immensely transformed stock trading, making it easier for people to carry out a previously cumbersome task.

There are several ways that technology has shaped the current state of the stock market and also its future direction. Here are a few ways that technology has transformed stock trading for the better.

Different Ways Technology Has Shaped Stock Trading

Easier Communication

Thanks to the advancement in the way we communicate, the availability of information has improved. Stock traders find it easier to get information about a stock and a company, thanks to the internet. The internet has made it easier to get access to a company’s information and make trading decisions based on the data.

In the past, traders got information about companies and securities such as stocks, bonds, and mutual funds from the local library. They also called a company directly to ask for their latest financial report, which could take some time to access. However, all this has been made easier thanks to improvements in the way we communicate and access information.

The internet has been vital in the emergence of online trading. Stockbrokers now have online platforms that link traders to current stock price information and help them buy and sell stocks. Thanks to advancement in communication and information acquisition, stock trading has transitioned from a pure proprietary, broker-driven sector to a direct analysis and trade execution by individual investors.

Easy to Use Trading Platforms

In the past, traders would line up at the New York Stock Exchange, yelling out orders to each other. It was a tough time to be a trader. Today’s high-tech trading runs smoothly without traders being on the floor of the exchange houses or shouting orders.

We have a wide range of trading platforms available to traders, and using them gets easier by the day. Traders can get real-time information and news about a stock and make trading decisions from the comfort of their homes. Trading apps like Robinhood, Trove, and others are targeting less technical people to ensure they can purchase and sell cryptocurrencies with ease.

Swift Order Execution

Computer systems record buy and sell orders quickly and traders can know the price and other trading details within seconds. Electronic trading has replaced people handling transactions, which means there are fewer errors during the trading process. While it still takes around three days to verify that money has changed hands and shares of a company have been recorded in a trader’s account, electronic trades accomplish these transactions in seconds.

High-Frequency Trading

The emergence of electronic trading has encouraged high-frequency trading. Traders use this trading style to buy and sell stocks within the same day, a phenomenon known as day trading. In most cases, traders carry out a full buy-and-sell circle within a few minutes. Institutional investors continue to benefit more from this advancement because it allows them to trade millions of shares within minutes.

Program Trading

Institutional investors like hedge funds, pension funds, and mutual funds now use programs to purchase and sell stocks. By setting the dates to either buy or sell a stock, the applications make it easier for institutional investors to take decisive trading actions. For retail investors and traders, the take-profit and stop-loss options ensure profit from trades and minimal losses. 

Big Data

This is a technological innovation that has improved the way we trade stocks. Big data involves the collection and analysis of massive datasets. Retail and institutional investors use big data for various tasks such as portfolio management, predictive analysis, and market sentiment measurement. This makes it easier to track patterns and make valuable trading decisions. For regulatory bodies like the SEC, big data helps them monitor market activities and trace illegal trading within the market.

Social Media

The advent of social media indirectly affects stock trading. Traders can use social media platforms to carry out sentiment analysis or track the impact of news on global markets. This is an excellent way to perform fundamental analysis and make trading decisions based on the latest news and other crucial events announced on social media.

Lower Trading Costs

Stockbrokers in the past charged premium prices to trade for you. However, things have changed since the advent of the internet. Stock trading fees are getting lower. We now have brokers like Robinhood that don’t charge anything when you trade equities with them. The costs of trading bonds and other securities are also lower than they’ve ever been.

Conclusion

Over the past few decades, technological advancements have made it easier for people to trade stocks. From gaining access to information to swift order execution, and lower trading costs, technology has transformed stock trading over the years.

Resources

https://www.investopedia.com/financial-edge/0212/how-the-internet-has-changed-investing.aspx
https://finance.zacks.com/impact-technology-stock-market-5807.html


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Alice Martin is a content writer at thestockdork. She enjoys writing on various topics mainly associated with Stock and Trading. Her famous articles are on the topic of Trading, Stock Market, Business, Finance and many more.

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