Technology is becoming more a part of our everyday lives and whether we’re at home or at work, large areas of our existence are governed by our use of the internet and other forms of technology. This is also having an effect on the stock trading industry, increasing the proliferation of trades and making the process more efficient.
The use of new forms of technology has changed the way in which the market operates. Some of these changes have had a positive effect, but the over-reliance on technology could also impact negatively. How will technology continue to change the face of the industry, and could it have the potential to lead to a new market crash?
Use of technology in stock trading
Over recent years, there has been an increase in the type of technology that is used in stock trading. The use of computer technology has completely revolutionized how stocks are traded. The process is now much more efficient and faster, benefiting both those selling and buying.
This has led to a significant rise in the volumes of shares that can be traded at any one time. Before 1986, when the technology was first used on the London Stock Exchange, an average of 26,000 trades took place every day. This figure rose sharply to 59,000 trades a day, just a few months after the introduction of computer technology.
Algorithmic trading has also brought about benefits that couldn’t be achieved by humans alone. This has automated the way in which trades are carried out, to enable buyers and sellers to achieve the best possible price. As there are so many trades taking place each day, computers can buy shares when a set of conditions are achieved, as it’s not possible to check on the level of each individual share. This could be when it rises or falls to a certain level.
The volume of data that is now handled by the stock trading industry means that more technology is needed to successfully carry out the transactions. Surveillance technology is necessary to ensure that all trades are carried out properly and in accordance with the regulations.
The growth in technology has allowed traders and investors to research the market more efficiently and make the most of the shares they are buying and selling. They can use online sites and portals, such as www.binaryoptionstrategy.eu, to study market activity and understand the best time to buy and sell.
The benefits of technology
Technology has certainly improved the function of the stock trading industry. It has made the whole process more efficient, leading to a surge in the number of transactions. The use of online analysis tools means that optimum price levels can be achieved with each transaction, and stocks can be bought or sold at precisely the right time.
Online trading capabilities, such as the use of smartphone apps, have opened up the technology to more people. This will further increase the number of stocks that can be traded at any one time. Transaction fees are also generally lower with online trading, when compared to offline methods, driving growth and making the process more appealing.
The use of technology means that stocks can now be traded at almost any time of the day. In the past, investors were restricted to when their local stock exchange was operational. However, across the globe there will be a stock exchange that is open pretty much 24 hours a day, so there are fewer restrictions relating to how and when investors can operate.
The problems of technology
As with all uses of technology, there are some disadvantages to integrating more into the stock trading industry. As a society we can become over-reliant on technology, which can lead to issues when problems occur. For instance, in July of this year the New York Stock Exchange was down for almost four hours during trading hours, because of a computer fault. These issues wouldn’t have occurred with physical trades, but there are elements that we have to allow for in our increasingly technology driven world to prevent them leading to a global crash. Innovation is essential in today’s society and technology within the stock industry will continue to evolve. Trading venues across the globe need to remain competitive and this increasingly means investing in technology.
As users become more tech savvy and technology impacts further on the industry, online trading will continue to increase. However, it is unlikely that we will again see such a significant change as when technology was first introduced to the industry.