Few people (if any) could have predicted – let alone prepared for – the profound impact that the Coronavirus (COVID-19) had on our world in the last few months. There’s no denying that today’s economic landscape has taken a beating; unemployment rates are climbing, financial markets are volatile, stock prices are tanking, and the global economy is uncertain.
Yet when we stop to consider how the pandemic has affected trading in particular, an interesting tale emerges: Brokers who were quick to adapt are navigating the new ‘normal’, successfully modifying their offering to their clients’ needs, not just to weather COVID-19, but to overcome it.
Several online trading trends have emerged amongst the chaos of the pandemic, giving people who are looking for alternative income streams the confidence and tools required to explore trading opportunities they had not previously considered accessible.
Whether these trends are here to stay remains to be seen, but for the moment we are seeing increased numbers of traders, increased trading volumes, and increased profits. Let’s take a look at how the recent global conditions (yes, COVID-19 included) have impacted online trading.
Trend #1: Game on for sports bettors
What’s a sports bettor to do when matches have all been canceled? With no league activity to bet on, research firm Eilers & Krejcik Gaming reports that sports betting has collapsed, resulting in a 60% drop in sports betting revenues in March 2020 compared to the previous month, followed by an estimated 80% drop in April.
As a result, many sports bettors have been trying their hand at online trading, contributing to a huge increase in new funded accounts; TD Ameritrade, for example, reported a record 608,000 new funded accounts during Q1 2020, more than triple last year’s pace, while E-Trade had 363,000 new accounts, more than double the numbers for the same time last year. Being used to quick wins (or losses!) in the sports world, these new traders tend to be highly active in an arena that typically favors a longer-term approach, with the result of even small-time players being collectively able to significantly impact stock prices.
Trends #2: Consumer confidence in online payments is on the rise
Consumer confidence in contactless payment technology has soared in recent months; online purchases are the only option when going out to shop is prohibited. But in-store, too, cash has been traded for payment at the tap of a card, using mobile wallets or even via a smartwatch, in part for reasons of hygiene.
With no alternative, many people have embraced this new payment norm, becoming more comfortable with entering their credit card details online. Technological (and psychological) barriers that once held some people back were removed, and this may affect volumes in online trading as well.
Trend #3: Is it calling time on traditional trading floors?
When a trader and an employee at the New York Stock Exchange tested positive for COVID-19, the iconic institution took the difficult decision to close its stock and options trading floors in New York and San Francisco, and transition to fully electronic trading. The move was announced as temporary, but given how smooth and successful the process proved to be, many are now questioning the relevance of trading floors, even after the pandemic is over.
Common sense suggests that, given the global shift towards all things online, it was inevitable that trading floors would eventually become redundant. But COVID-19 certainly accelerated the wholesale move, made possible by the availability of electronic trading and online brokering.
Trend #4: Forex forges forward
Since the outbreak of COVID-19, forex has experienced a huge increase in trading activity. Short-term traders in particular make the most of the volatile conditions and the result is record monthly trading volumes – as reported by liquidity providers and forex trading platforms.
With the majority of trading professionals working remotely at the moment, the pressure on trading operations, technology, and infrastructure have been somewhat alleviated by online trading platforms, which have seen a rise in activity from clients who themselves are stuck at home, many of them out of work and looking for new sources of income.
Trend #5: Smart tools for smart trading
Rapid changes in the market have created a heavy workload for traders in recent months, driving many to seek out smart tools that simplify the various stages of the trading cycle and enable more sophisticated decision making, from finding trade opportunities and assessing the state of the market, to smoothly executing transactions and calculating profit and loss.
Amongst the tools we identified financial charts and reports, transaction history for robust risk management as well as sophisticated business intelligence tools that help traders assess trading performance and capitalise on opportunities. Traders who know how to write code turn to algorithms that can execute transactions smoothly in volatile markets, but those who can’t have their options, too. For example, brokers can offer their traders smart automated trading tools like Capitalise.ai, which lets even those who are not tech-savvy enjoy the benefits of automated trading, removing technical barriers and opening up new trading opportunities.
So, where does this leave brokers?
As the world braces itself to face the continuing effects of the COVID-19 crisis, brokers and traders can take comfort in the fact that all is far from lost. The trends discussed above – the influx of novice traders, a rise in consumer faith in contactless payment technology, successful remote trading, the huge boost to the forex market and the increased availability of smart trading tools – give cause for hope that trading will not only survive the virus, but also thrive in the meantime. Once the world emerges from this pandemic, a new normal will undoubtedly take shape; a normal where smart tools and automation continue to make the lives of both brokers and traders easier while making financial markets more accessible to a new generation of traders.