The past two decades have seen the number of active traders grow from a few thousand to an astonishing 9.6 million. What has made this possible? Academics can give you lots of different reasons but most of them boil down to one thing: the internet. By making trading more accessible, improving traders’ skills and supplying the information they need for success, it has enabled many more to get involved and stay involved, radically changing the financial markets. How did it happen and what does it mean for traders operating today?
Access to trading
There used to be a lot of barriers making it difficult for the average person to be involved in investing, but a combination of technology and consumer pressure has begun the process of breaking them down.
- Affordability – investors used to need around $150,000 just to get started. Now you can start with just $150, including the cost of paying broker fees, though it’s wise to spend more if only to ensure that you have good equipment.
- Location – it’s no longer necessary to be in a city with a stock exchange – the internet lets you trade from anywhere you can get a connection. This also cuts down costs because you don’t need to be able to afford big city accommodation.
- Time – Traders used to be restricted to trading nine to five – or fewer hours – in their own countries. Now you can trade through exchanges all around the world and there’s almost always somewhere open for business, so it’s easier to do it alongside a day job.
In the past, one of the big challenges for newcomers was learning how to trade, which was difficult without a university degree or a mentor. Now there are lots of ways to do it. There’s a good deal you can learn from reputable websitesand from videos on YouTube or Vimeo. Online courses are another good option and are often free as well as having flexible hours. Many brokers provide their own guides and online seminars. Another benefit of the increase in the number of people trading is that it has decreased the prices and increased the availability of books on the subject.
Another big problem for new and inexperienced traders before the introduction of the internet was the difficulty involved in researching assets and accessing up to date information about the markets. Today there are numerous trade journals reporting, analysing and predicting market developments, just a click away. There are social media feeds you can follow if you want to focus on specific areas and many brokers offer up to the minute news feeds. What’s more, it’s easy for you to investigate for yourself. Although you shouldn’t trust everything you find online, established libraries and regulatory organisations are really useful sources.
The result of all this has been to democratise investing and this, in turn, has changed the way the markets move. Companies come under a lot more scrutiny and, in most cases, have to generate mass appeal rather than relying on a few wealthy individuals. This has created a trading environment that’s better for everyone.