Technology has changed trading in a multitude of ways, the first of which being increased market volatility. It has never been easier to trade than in this day and age, where at the click of the button, you can buy or sell shares in a company, and this trade will be registered in a matter of microseconds. As a result of this, more people than ever are getting into trading, and this means that the concept of a “herd mentality” is stronger than ever. When someone gets a tip from a trader who has a reputation for getting it right more often than not, they will pass this information on to their friends, which will result in a chain reaction. Therefore, share prices will have larger swings, as a result of the greater volume of trading.
Moreover, a greater emphasis has been placed on shorter term trading, which is, in turn, leading to the increased popularity of CFD trading. The new, younger generation have been conditioned to want everything in a matter of seconds, as that is simply how they have been brought up, in an world where it is becoming increasingly easy, in this rapidly developing world, to have all your whims and fancies served up to you on a silver platter. This is why trading on short term fluctuations is ideal for the younger generation, and also why scalping has become so popular in recent years. The young people of today want profits, quick and easy, and CFD trading is a excellent avenue to provide that.
While it is a good thing that lots of young people are getting into trading, it also means that there has been a disturbing “blurring of the lines”, if you will, between trading and gambling. Analysing the charts, and using moving averages and the like is slowly becoming obsolete, with people simply wanting to trade to make a quick buck. This means that share prices are now becoming more and more random, so, in fact, these young people are also taking the adults down with them, and it is becoming harder and harder to make a profit. While I acknowledge that young people do not make up such a large proportion of the trading contingent as perhaps the older traders do, I see the proportion of young people trading proliferating over the next decade or so, and they will become a crucial factor in share price movements, even more than they are already.
Finally, the introduction of technology into the trading landscape means that financial markets are more susceptible to manipulation and exploitation than any other time. A recent example of this would be the case of Navinder Singh Sarao, who caused the 2010 “flash crash” where prices fell and then rose in massive amounts, all in a matter of 20 minutes. When technology was not used in trading, and you simply had to give orders to your broker, the system was less susceptible to manipulation. With the growing explosion of young computer “geeks”, there are more and more people who could be a threat to financial markets, and, dare I say, they are more in danger than ever before.