Before the popularity of the internet, investors looking to trade in stocks would have to contact their stockbroker before placing their order. In addition, the lack of information led traders to part with high commissions when buying and selling stock. However, the widespread use of computers in the early '90s saw the emergence of online trading platforms, leading to the creation of new products such as the Exchange Traded Funds (ETFs).
In addition, it's become easier for investors to get the information they need regarding brokerage firm fees and investment options through the internet. Today, many brokerage firms have mobile apps that make it convenient for investors to keep track of their investments on the go.
This guide explores more ways technology has helped transform investing.
The Use of Computerized Trading Terminals
The first computerized trading machine was introduced in the 1960s, and it featured simple keys which analysts could use to request stock quotes. This has significantly transformed over the years, especially with advanced terminals like Reuters and Bloomberg.
These are cloud-based software solutions that offer investors a secure way to execute trades and access real-time market news. The other great feature of such software solutions is that it allows you to chat with competitors and clients conveniently.
Social Media Is Shaping Investment Decisions
Today, social media has become one of the fastest ways to get information regarding the stock market. Before the popularity of social media, most people relied on television and newspaper for information. In the early years of the internet, before the advent of social platforms, there were investment forums and chat rooms like the dinar detectives that discussed different aspects of the stock market.
A recent research project showed that social media has a significant impact on investor decisions despite some of the information on such platforms not being true. A great example is the 2008 rumor that the then Apple CEO Steve Jobs had a heart attack, leading to a 5% temporary drop in Apple's stock.
The Popularity of Online Trading
The introduction of online trading had a significant impact on the operation of the stock markets. One major transformation was the introduction of low-volume trading to help low-volume traders digitally interact with stock exchanges. This provided an excellent investment opportunity for people who would otherwise be left out of trading.
The introduction of online trading also helped to reduce the overreliance on brokers. Before the popularity of online trading, traders would seek the help of an investor to place trades via a full-service broker or financial advisor. This option required them to part with a commission of about 2.5%. In three decades, different brokerages have created online trading platforms that offer traders information like the best index to invest in to help them make better trading decisions.
The Introduction of Circuit Breakers
The advent of circuit breakers has proved an effective way to create a stable financial market. This is because stock exchanges use them to help prevent panic selling. It achieves this by halting trades on security or exchange in case of excessively volatile prices when a pre-defined threshold is attained.
If an index is set at 20% of its limit and threshold met, the stock trade will be halted until the next day. Circuit breakers came into effect in October 1987 following the drop of DJIA by 22.6% in one day, which led to the collapse of the market – which was later labeled as "Black Monday."
The Rise of Automated Technology
In the past, investors had two options; make individual stockpiles themselves or hand over their fate to an investment manager to help them make a positive return on their investment. Today, modern investors have a lot of information that goes beyond reporting current prices, which has led to the adoption of automation technology.
This technology is applicable in the form of high-frequency trading, whereby a computer system monitors different securities perform then executes trades depending on the market trends.
There has been a significant transformation in how people invest, which is majorly attributed to the advent of the internet and technological advancements like automated technology. This guide has shared a few transformative changes witnessed in investing over the years.
Author: I’m Jaylin: Guest post service planner of Leelija and full time blogger. Favorite things include my camera, traveling, caring my fitness, food and my fashion.
