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Technology has influenced every aspect of our lives: at home, on social media, and at work. It has changed the way we communicate, the way we learn, the way we live, and the way we do business.
The topic of interest in this article is about how technology has influenced the world of stock markets and trading. In particular, you will learn six techniques to use technology to your benefit to improve your trading practices.
6 Ways to Use Technology to Trade Better
From the moment we wake up and check how the markets performed overnight, to the time we sleep at night before doing another check of how the market is set to open elsewhere in the world, technology now plays a critical role in everything we do and the way we do things.
1. Continuous Access to Information and Trading
There was once a time when only professional traders had access to trading platforms. Now, practically anyone with internet access and sufficient money can trade. Technology has made trading open for everyone while keeping the experience streamlined at the same time.
Forex trading is one area where this effect is distinctly visible. What once used to be the domain of institutional and corporate players is now an essential component of the portfolios of even retail and private investors.
With online courses, articles, and blogs about various stock market terminologies, rules, and strategies, you have access to a wealth of information as well. You no longer need a degree or a fat book to know what the PDT rule is or how to survive in a bear market, but you can look it up instantly on the net.
2. Automated Trading
Automatic trading systems (also known as algorithmic trading systems) allow traders to program a set of instructions regarding trade deals so that a computer can execute the trades automatically. For example, you can ask the system to automatically sell 200 shares of Microsoft the moment the 20-day moving average of its stock price increases beyond a pre-set threshold.
The biggest advantage of automated trading is the sheer volume of trades that can be handled by a machine compared to a human. A computer can execute several deals in the span of microseconds across different markets; this is called high-frequency trading (HFT).
The other reason you would want to use algo trading is that it stops your emotions from getting in the way. Since all the rules of the trade deal are programmed, you can no longer execute a potentially bad deal based on an impulse or an emotion. Improved quality of markets, greater liquidity, narrower spreads, and overall increased trading efficiency have all been made possible due to algorithmic trading.
3. Increased Competition
“In a way, technology has forced brokers and platform providers to lift their game and enhance their offerings,” says Michael McCarthy, Chief Market Strategist at CMC Markets. As technology evolves, customers are always on the lookout for better trading options available. Traders have to constantly keep updating the services they offer to attract more customers.
For example, earlier, charting features used to be a bonus feature on most financial platforms, but today, it has become a basic feature that must exist in trading platforms for traders to even sign up.
The more features a platform has, the more novice-friendly it is, and the more transparent it is, the more users it is likely to attract. As a user, these are three of the most important things you will look for in any platform.
4. Mobile Apps and Alerts
Most professional traders have computers in their offices from where they trade, but for other day traders or part-time traders, having access to a computer throughout the day (or trading hours) is a tough ask. With mobile trading apps that are now available, you will be able to trade any time you want. Most of the top trading apps offer features that are otherwise only used by professional traders.
Some trading platforms also send you alerts on your mobile for various purposes. You can ask the platform to alert you when a certain market scenario occurs, or you can ask for regular updates on financial news, or the performance of a particular basket of stocks and so on. Stock APIs provide real-time and historical prices across different markets that let you keep track of some particular stocks of interest.
5. Social Trading
Just like how a social network allows you to connect with friends and colleagues and share photos and experiences, social trading allows you to connect with other traders and share ideas. This helps new traders learn quickly by gathering information from the best players in the market. Of course, being in the same room with ferocious and ruthless traders can be overwhelming for a novice, but that’s part of the learning experience.
Apart from just mirroring others’ strategies, social trading also lets you form collaborations with seasoned traders, allowing you to learn a lot while also earning money.
6. Increased Freedom for Traders
The way technology has disrupted the trading space has a few major consequences for you as a trader. The first is that you have a level playing field: round-the-clock access to information, trading platforms, and other professionals give you enough exposure to learn anything you want.
The other is that you have the freedom to trade any sort of stock in any market; as long as you know what you are doing, there is nothing that limits you to stick to only one security. You are also free to trade any time you want, whether it is while sipping your morning coffee or during your lunch break at work.
Are You Geared up to Trade?
Unless you work for a trading company, it is unlikely that you will have access to all the sophisticated and licensed software that is used in the industry. However, it is always good to be aware of the applications of technology in trading, along with the other rules and strategies that any trader should know. To gain some experience, check out some online stock trading platforms where you can trade free stocks with virtual money.