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What's behind the growth of online trading?

What's behind the growth of online trading?

Trading is as old as humanity itself, with the first transaction tracing back to ancient times. As our society and technology progressed, so did the craft of trading.

With new financial instruments appearing and new methods of trading becoming popularised, online trading is currently at its peak, providing an easy and accessible way of exchanging a variety of assets for everyone - but how did it become so big?

Trading before the Internet - how did it start?

Online trading seems to have overtaken all traditional methods of trading, even though it’s a relatively new advancement. Before the Internet was a common thing, most exchanges were performed person-to-person, mostly at stock exchanges like the NYSE. The first computer-based trading system was Nasdaq, opening in 1971 as the world’s first electronic stock market. However, when Nasdaq was launched, it only featured a quotation system, with no actual way to perform trades electronically.

The same year, the first electronic trading platforms and online brokerage services were launched - Globex and E*Trade. Globex was also the first system designed to implement futures and options trading as well. This quickly made trading much more popular among the general audience, while before trading was performed almost exclusively by people who were part of the financial industry.

What made online trading so popular so quickly?

Above all else, online trading is extremely accessible - virtually everyone can start trading by simply opening an account on an online trading platform. After funds have been transferred to the platform, many offer users the chance to trade whatever securities you wish, including stocks, currencies, commodities, indices and more.

Finding the information you need for creating a solid investment strategy is much easier thanks to the Internet, as you can access extensive company reports at will from your computer or phone. You can also easily find expert opinions, predictions, and analyses all around the web.

Online trading has come a long way since the first electronic trading platforms, with advanced security and authentication mechanisms developed to make the trading experience as safe as possible. New trading methods and financial instruments began appearing online, like CFD trading, which lets investors make profit using leverage. Read more about leverage trading in this article by Harvard Business School.

The potential opportunity to find passive income without leaving the house further popularised online trading - especially after the COVID pandemic began. With people staying at homes during lockdown and the economy crashing all over the world, online trading provided many with an alternative money source. Through readily available educational material, portfolio managers, and trading tools, online resources made it easier to educate yourself on the market.

The evolution of online trading - what does the future hold?

Over the last couple of decades, technology fully revolutionised the global financial market. Each year, we can gather and analyse vast amounts of data, providing tons of useful insights for investors. The rise of online trading communities brought countless amateur traders from all over the world together, following a joint strategy to make some profit for everyone involved. As we’ve already seen with GameStop, such communities can create massive ripples in the market, and they may continue to gain influence in the future.

Where is online trading heading to? We’ll definitely see further technological innovations and the rise of advanced online trading platforms. There are new apps being created almost every day for traditional trading, spread betting, options trading, and many other forms - sometimes all combined in a single platform.

All in all, there’s a lot to look out for in the future of online trading. With rapid advancements in fields like artificial intelligence, machine learning, and cloud computing, trading will only become more accessible and easier to manage, with a lot of the hard work everyone was used to becoming automated.

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