Technology has influenced a number of different industries, with its impact on the global financial market having being especially pronounced. While the benefits of this technological advancement have been largely well received by traders and financial institutions, there remains growing concern among some factions that the recent innovation of High Frequency Trading (HFT) and automated trading could create an extremely unstable and volatile market.
While the European Union (EU) has recently proposed several measures to restrict HFT, an investigation carried out by the U.K. government claims that these ideas should be resisted. The report found there was no direct evidence to support the allegation that HFT or computer-driven trading increased the market's volatility; in fact, it appeared to confirm the suggestion that criticism of these innovations is based more on fear than reality. This contrast of opinions is shared in nations throughout the world, many of which remain unsure whether to embrace this technology or resist it.
Online Trading Applications and the Current Financial Market
The development of HFT and automated trading reflects the pace at which technology is evolving in the financial markets and also offers an insight into the direction that the industry is taking. Take the Automated Trading Championship, for example, which began in 2007 and has emerged as an extremely popular annual competition. It encourages participants to enter their individually-programmed trading robots into a simulated market environment, with the object being to generate as much profit as possible through predetermined transactions. More than 451 contestants are taking part in the current tournament, which is an increase of more than half from the previous year.
While the idea of reducing direct human involvement in trading may be a controversial one, it has evolved gradually from the development of online trading applications. These innovations, which allow investors to monitor their stocks and execute orders through mobile devices, became widely used during 2011, as sustained growth and competition in the smartphone market led to the creation of increasingly sophisticated apps. These applications offered a high volume of technical indicators that significantly reduced risk and minimized human error, and this prompted a record number of investors to use their smartphones during increased market volatility last summer.
The Leading Applications for Investors
The usage of some applications grew even faster than the smartphone market itself, with the TD Ameritrade Mobile App providing a relevant case in point. Created by established brokerage firm TD Ameritrade, its user base more than doubled throughout 2011 as an estimated 30,000 investor traders were executed in August alone. The application is also compatible with a number of individual mobile devices, including the iPad, iPhone and Android handsets. In addition to this, it benefits from a comprehensive range of tools and real-time streaming quotes, which can afford a critical market advantage to investors.
According to research group Corporate Insight, 12 out of 19 leading brokerage firms have released at least one trading application. One of the most popular is the MetaTrader4 mobile app, which can be accessed through the iPhone and handheld Android devices. It was also unveiled after the release of the MetaTrader5 trading platform, which means that it boasts the latest upgrades while also holding special appeal among users who are familiar with the fourth version's much coveted software.
The MetaTrader4 application offers traders an easy to use interface, while also delivering real-time quotations and a range of detailed charts. Perhaps even more significant than this, however, the application also offers users access to a full and comprehensive trading history, which means that they can analyze specific financial instruments and their performances over a sustained period of time. This can be an invaluable tool for serious investors, especially those who are interested in securing long-term gains.
These applications offer undeniable advantages to experienced traders, but there are a wider range of apps that may also suit aspiring investors. Take the iTrade Stock Market Simulator, for example, which allows users to trade within a real-time and accurately-replicated market environment. The application also features realistic delays for order executions, while encouraging competition among users and allowing novice traders to experience the financial market without risk.
The Bottom Line
While debate will continue to rage concerning the merits of HTF and automated trading, the positive impact of online trading applications cannot be ignored. After all, although mobile trading applications offer a vast range of technical indicators and tools to help investors trade profitably, they also encourage direct human involvement and the use of intuition. To many this is an ideal balance, and one that creates a stable market that is largely free from large-scale manipulation.
At the time of writing, Lewis Humphries did not own any shares in any company mentioned in this article.