Change is inevitable, especially in the world of stock markets. Over the last century, stock markets have undergone a rapid transformation. Gone are the days when traders gathered on exchange floors, shouting orders. Today, nearly 99% of traders utilize electronic trading platforms. This shift from costly full-service brokers to discount brokers, from manual trading to algorithmic trading, and from tape reading to advanced charting platforms represents just a fraction of the changes witnessed. What lies ahead for the next 20 years? Here, we present our top 5 predictions, and we invite you to share yours in the comments below.
Artificial intelligence (AI) and machine learning are poised to become integral to the future of trading. Intelligent machines will supplant manual interventions, mitigating the emotional aspects of trading. These machines will continuously learn from each trade, adapting dynamically to changing market conditions, and making them proficient in all market scenarios. Traders will no longer compete against each other but instead with these AI-powered systems!
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Expansion of Derivative Products
In nearly every stock exchange worldwide, the majority of trading occurs in derivative segments like futures and options. These products offer greater flexibility compared to underlying securities. Expect a surge in the number of derivative products in the upcoming generation. Imagine real estate derivatives or second-order derivatives becoming commonplace! We may also witness derivatives with weekly expirations or categorizations based on risk.
The advent of algorithmic trading systems has ushered in automation in trading over the past decade. This trend will accelerate even further. Human telecallers at brokerage contact centers may soon be replaced by intelligent robots. Your trading terminal might comprehend voice and gesture commands. Individuals will market automated trading systems, gradually diminishing the appeal of traditional advisory services. Large hedge funds may increasingly prefer trading bots over human traders. The possibilities are boundless and limited only by your imagination.
Extended Trading Hours
Expanding trading hours is likely to occur sooner than other changes. The current 6-hour trading window may prove inadequate for full-time traders. As trading becomes more automated in the coming generation, exchanges may permit 24/7 trading, especially in the derivative segment, akin to the forex market. This shift would boost trading volumes, benefiting both brokers and exchanges.
Trading as an Educational and Career Option
We are more confident about this prediction than any other in this article. Trading, once viewed as akin to gambling, is undergoing a transformation. A substantial amount of science and mathematics underpins trading for those willing to delve deeper. As the scope and popularity of trading expand, educational institutions will introduce master’s and bachelor’s programs in trading. Professional courses focusing on algorithmic system development and mechanical trading will proliferate. Hedge funds and financial institutions will increasingly hire candidates enrolled in these courses. Trading is destined to evolve into a white-collar profession in the near future.