Recent Trends in the Development of the Online Trading Industry
It is fitting that the online trading industry is in a constant state of development. Markets are always changing, so it is important that platforms change too. Most innovations in the early years of online trading platforms focused on the mechanisms of trading itself, from creating new analytical tools to the production of bots that could assist with trades.
Platforms have now mastered the art of online trading, delivering comprehensive services and easy-to-use interfaces. This has seen a shift in areas of development for the online trading industry, with the focus now on supplementing the core trading experience. These developments can mostly be categorised into two broad groups: social and security.
Social innovations include an emphasis on community building and the provision of trading academies, while trade protection features and regulatory changes have been introduced to enhance the security on online trading platforms. Here is an overview of the most significant trends in the online trading industry in the past few years.
Social trading platforms
A fundamental feature of social media sites is the ability to share opinions. Social trading platforms take that concept and apply it to the financial world, with users able to decide whose opinion they trust the most. Given that these are trading platforms, those opinions take the form of someone’s trading record rather than a stream of consciousness accompanied by a cat meme.
Users can find a fellow trader with a strong track record and choose to copy or mirror their moves. A copied trade is simply the same trade, whereas a mirrored trade is placed at exactly the same time as the original. The latter function can be achieved through auto-trading, where a user chooses who to follow and has their mirrored trades completed automatically.
There is a growing trend of online trading platforms supplementing their services with educational material. The world of trading is full of specific terminology and significant decisions that can be daunting, particularly for a rookie, so some companies in the trading industry have created virtual academies to get traders up to speed.
Most online trading platforms offer how-to guides or instructional videos to help users master their range of services, while there are also specialised offline academies that deliver courses on various elements of trading. For example, an aspiring futures trader would naturally benefit from the educational courses at the London Academy of Trading, the UK’s first accredited trading academy. There are plenty of further online training course options for those wanting to get to grips with stocks or forex, with the growth in both areas of this industry illustrating the power of trade in the 21st century.
The practice of trading has always come with an understanding that there is an element of risk. Even the most confident trader on their most confident trade knows that markets could fluctuate at any moment, as geopolitical events frequently take markets by surprise and send prices spiralling one way or the other. Unless you only use demo accounts with imaginary funds, an online trade is always completed with the acceptance that an investment could be lost.
That may be about to change, with AvaTrade’s AvaProtect tool ensuring that risk free trading goes from being a dream to an achievable goal. The service enables traders to purchase protection for a specified time period on each new position. If the trade is losing when the protection period ends, then the initial investment will be reimbursed. This provides a safeguard against those unpredictable events that could destabilise even the most well-planned trade at any time.
The appropriate level of regulation in the world of online trading is the focus of an ongoing debate, but there is recent evidence that the industry is trending towards higher levels of regulation and lower leverage on trades. While regulations can vary from region to region, many countries have already taken steps to prohibit trading binary options and eliminate the use of sign-up offers at online trading platforms.
The European Securities and Markets Authority (ESMA) experimented with the introduction of leverage caps, including a 30:1 limit on major currency pairs. This affected online brokers that previously facilitated trades with leverages of 100:1, 200:1, or even higher. While the ESMA implemented these caps with the aim of making retail traders more profitable, these regulations were withdrawn after an unsuccessful trial. Reducing leverage may not have worked in that instance, but this will not be the last time that regulatory bodies seek to cap leverages to improve the fortunes of retail traders. These areas have all witnessed important developments in recent years, but further changes are likely to follow. Whether through the introduction of new social features or the implementation of new legislation, online trading platforms will naturally continue to evolve over the coming years. It is probable that the most significant developments will seek to elevate the social side of trading and to deliver further protection to individual traders.