How Does the Rise of FinTech Influence Trading?

FinTech has had such a major impact on our daily lives that even the people who don’t have any connection with the finance industry are affected by it. As the years passed, it became obvious that FinTech is not just a buzzword or fleeting trend, but a new movement that can change the way we interact with financial services. However, contrary to popular belief, FinTech isn’t only about banks and loans. As one of the most dynamic fields, FinTech continues to expand and influence related sectors, including trading. From veteran traders with decades of experience to beginners who try it out because they’ve heard great things about it online, everyone has experienced first-hand the disruptive force of FinTech and discovered many lucrative opportunities thanks to it.

How the FinTech revolution brought trading to the masses

One of the biggest changes brought by FinTech was the expansion of financial services among non-experienced users. In the case of banks, for example, the change was very noticeable, because people no longer had to physically go to their local bank branches to get information about their accounts, make money transfers, open savings accounts, or get personalized funding solutions. All of this can now be done from the comfort of your home, by using a banking app or by switching to FinTech companies.

A similar phenomenon has also happened with trading, and things will continue to change. In the past, trading, whether it was stocks or Forex, was an activity reserved to the experts. Without decades of experience in investments, or a job in the finance field, outsiders couldn’t get into trading because both the know-how and the platforms per se were inaccessible. Without high-speed Internet, people couldn’t access live information about buying and selling and the news on TV wasn’t enough to offer an all-encompassing trading context. For the digital natives that grew up with smartphones and instant payments, a world where Forex wasn’t mainstream is hard to picture, but decades of innovation were necessary for this to happen.

FinTech changed all of this. Now, everyone can trade online by opening accounts on dedicated platforms. Forex, in particular, became very democratized. People from almost everywhere in the world can find a suitable broker and choose a good PAMM account manager, look up trading strategies, open demo accounts to practice or join social trading networks to learn from other traders. Apart from these platforms, there are also hundreds of blogs that discuss the global news that impact currencies, as well as educational platforms that explain trading in detail. Of course, social media has a role to play too, because it allows for the rapid flow of information and facilitates networking between traders.

According to the latest statistics, the daily FX volume jumped to a whopping $6.6 trillion, and it will continue to grow thanks to the increasing awareness on this topic.

The versatility of robo-advisors

Investments in general, and trading in particular, are activities that can’t be left to luck. Although it is possible to close a successful trade without knowing exactly what you’ve done, the best traders are the informed ones who know their financial situation, understand the economic context that influences asset prices, are good at managing risk, and how where to place their money.

Before FinTech, becoming one of these traders required a long journey of trial and error. As for advice, it only came under the form of mentorship. Today, thanks to FinTech, traders have robo-advisors: specialized online services that use AI to understand the trader’s goals and provide automated trading advice in a user-friendly interface.

Although they’re inexpensive, robo-advisors can handle sophisticated tasks with no human help, such as selecting investments, tax-loss harvesting, or building personalized investment portfolios. This way, even beginners can start trading responsibly and boost their education without having to follow a course. In comparison, traditional (human) advisors typically only work with clients who have at least $100,000 in assets, charge up 2% and aren’t available 24/7. Of course, there will always be cases when a human touch is required, but, in most cases, and especially for beginners, robo-advisors are more than enough to ease the trading process.

As AI becomes more sophisticated, FinTech will also start to play a poignant role in risk management in trading. Although risk is inherent to trading and loss is often unavoidable, new technologies have made it possible to develop advanced algorithms that analyze the state of the market and the global economy. This way, traders will know when they should execute a trade and when it’s best to wait.

Crypto and trading

Although the cryptocurrency market isn’t growing as quickly as expected, the industry has matured and now crypto enthusiasts can use their assets for trading as well. Brokers are slowly starting to allow users to trade with crypto as they would with conventional currency pairs and, even when that’s not possible, they can choose to fund their accounts with bitcoin.

FinTech has opened new horizons to traders. Thanks to technology, people can execute trades and manage trading accounts as easily as they make money transfers and the best part is that they don’t have to count on a financial institution to do so. Combined with the widespread availability of real-time information, this empowers traders to develop solid strategies based on their goals. As FinTech continues to grow, its influence on trading will grow too, so experts expect trading volumes to increase even more. In the long run, this will also create new business models and, contrary to popular belief, digitization will not lead to fewer jobs in finance, but rather to a shift in the allocation of human talent.

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