Although there are many advanced tools for trading and an unlimited amount of information, many investors fail to remember the foundation on which investing came about. Investors may not remember how the markets became altered by the trends made by technology, everything from the way the stock market was born to how algorithms are incorporated into trading. We’ve seen many advances in how technology has shaped investing.
Today, we will bring together a few technologies that have been able to transform the way we are able to invest today. With many advances in technology already existing, like AI, high-frequency trading, and cryptocurrency, there are many more that continue to change the landscape. So, regardless of how often you invest, we have a few technologies that you should be aware of which continue to create huge impacts within the whole investing world – individual investors like us and also advisor firms that have more complex stock management strategies
As we saw the number of traders decrease because of trading electronically, trading online has also now begun to change up the way a broker is involved. In the past, an investor made calls to have a trade placed on a stock that might have unusual options activity. It required them to add an extra 2.5% for the broker’s commission fee.
Towards the end of the 80s, many online trading platforms started popping up in brokerage firms so that their investors would be able to receive the latest stock information concerning prices as well as assist with selling and buying that was done directly.
When garnered with the accessible information available throughout the web, individual investing has allowed individuals to skip the broker altogether. This now leaves brokers to only assist with the monitoring of the market.
Trading terminals have come a long way since their heyday. Back then, the terminals were designed so that analysts were able to punch in certain keys in order to obtain quotes on stocks, which was a huge advancement at the time that allowed information to be easily shared.
The terminals we see today are available from many financial entities such as Reuters and Bloomberg. Their terminals are the most advanced and use software that is cloud-based, so any investor is able to upload it onto their device. With investors having a network that is secure, they are able to communicate with competitors and clients, conduct trades, and obtain both news and pricing in real-time. However, you need to remember that each terminal costs around $20k to use.
The Circuit Breaker
Although the circuit breaker may look like something that wasn’t very ingenious when compared to today’s technology, it did play a major role in stabilizing every financial market we see today.
With a circuit breaker, their main purpose was to help prevent investors from selling due to panic. If panic was sensed, it would trigger the circuit breaker to stop trading in order for the panic to subside. This halting also occurs when the market prices are too fluid. Installed in 1987, the circuit breaker was brought in due to a market crash that occurred on October 19.
For indexes that fall as low as 7% compared to the previous day prior to 3:25 pm, all exchange trading stops for a minimum of 15 minutes. However, if there is a 20% change, then the market trading will cease for the remainder of the day.
Investing Via Smartphones
When the first PDA and cell phone made their appearances, they quickly began to make investing a lot easier and faster because of the speed of sharing information. Having a cell phone provided a great advantage that did away with having to be at home or an office in order to make financial trades.
Introduction of Financial Apps and Tools
The introduction of financial apps and tools like LearnVest, Mint, and Quicken was able to improve how people are able to keep an eye on their own finances and investments. These tools also gave them a better way to manage themselves.
Now, any financial consumer is able to monitor their investment activity, maintain a budget, and pay their bills thanks to these easy to use apps and tools.
The use of data analytics and big data has begun to play a huge role in both managings and regulating the markets. For example, the SEC utilizes big data in order to observe the activity of the markets to ensure there are no prohibited activities occurring.
Besides the markets, data analytics is also used by hedge funds, banks, and retailers in order to make predictions, measure sentiment and manage portfolios.0