Innovation is Democratizing Retail Trading
How tech trading platforms are ushering in a new era of retail investing.
Nearly 150 million people in the United States are invested in the stock market according to a recent 2023 Gallup survey. The number of retail traders in particular is on the rise. Long gone are the days when only professional traders could easily access real-time data, information, and tools that enable better informed and faster trades.
The democratization of investing is driven by technological innovation within trading platforms and we can only expect that trend to continue.
The knowledge and access gap between highly active, professional traders and somewhat active, newer investors is narrowing. The transformation in digital investing is happening at breakneck speed. However, that also presents a challenge – it is more difficult for investors to assess platforms that match their level of expertise and can provide the trading experience they seek.
What should retail investors look for in a sea of trading platforms?
Democratization in investing is enabled by innovation within three categories: education, data and tools, and trading communities. Educational resources are key to making smarter decisions; data and tools enable better execution of those decisions; and trading communities allow for a better experience within a platform and connecting with likeminded individuals.
By evaluating these categories, retail traders can better understand whether a particular trading platform meets their needs and matches the experience they seek.
Table stakes: what traders should expect from every platform
Trading platforms are more sophisticated than ever before – evolving from a simple execution device to a complete, all-in-one investing solution that includes real-time quotes, news, and the ability to trade. Platforms have become easier to navigate, more intuitive, and visually exciting which in turn makes adoption easier than ever before.
Starting with $0 commission trading and accessible online account opening is a given, not a differentiator. Traders will also find platforms that offer the ability to trade in multiple global markets, which is a sweetener, but fairly common.
Real-time quotes for both stocks and options, news, and research are all features users expect to be included for free, not for an additional fee as an add-on.
Key differentiators retail investors should look for
Traders should look for tools and visuals such as advanced scanners, tracking of the inflow/outflow of capital into stocks, and customizable charts because these are examples of what will enable them to make better-informed decisions.
Some trading platforms foster a community for investors, which is becoming increasingly popular. Trading was traditionally considered “lonely”, and platforms that create a space for conversations and the sharing of ideas among like-minded individuals will enhance the overall trading experience.
Cutting-edge technical analysis of market dynamics and stocks that was once only available to institutional investors can now be accessed for free on some platforms. In addition, educational resources play an important role in empowering investors.
Platforms that offer all or most of the tools and resources above – from education, experience to analysis – are and will continue to be at the forefront of democratization in investing because they are in tune with what investors both need and want.
The Gap: Not all investors have the same needs and wants
Many platforms cater to investors who are just beginning their trading journey, and even more, platforms serve the needs of highly active, professional investors.
Very few platforms are built to serve active traders who consider themselves neither professional nor beginners.
These active traders reside in a niche, yet important investor segment, as they have “graduated” from the platforms with basic tools and offerings and are now interested in a platform that can grow as their experience and desire to trade grows.
These traders desire a bespoke trading experience that is uniquely crafted around their level of financial acumen and education, an experience that can’t be one-size-fits-all.
What does the future hold?
Opportunities to improve platform capabilities and investor experience are endless. With the evolution of platforms, we can spot the next innovative frontier that platforms will need to rise to or get left behind.
Machine learning algorithms will continue to drive customization within a platform – for instance a feature that could automatically create customized chart comparisons. Also, in the near future, algorithmic trading systems will enable traders to set rules and then, once programmed, the trades could be executed automatically.
Democratization is about the availability of choices and the ability to trade what you want when you want. An example of this could be 24/7 equity trading, faster availability of deposited funds with less risk of fraud, greater availability of international payments and investment options, and faster trade settlement, perhaps built on the blockchain.
We are seeing exponential advancements in the capabilities offered to retail traders, but in order to attract the evolving nature of traders, platforms will need to grow with their investors or risk their investors outgrowing the platform.
Justin Zacks leads the strategy and growth in the US for Moomoo Technologies, Inc. Zacks helps to identify risks and new growth opportunities for the company’s online trading business while also assisting in optimizing its existing business lines. Zacks also provides internal and external thought leadership about market dynamics and trading while also serving as the spokesperson for the company in the US. Zacks guides and facilitates the distribution of moomoo’s news product to its users. He is an active member of the Moo community where he interacts daily with users in a special social section of the moomoo trading app.
Prior to joining moomoo Zacks worked as a reporter in Bloomberg’s equities division. Prior to Bloomberg, he analyzed and provided commentary on M&A and event-driven situations at both Reorg and Dealreporter. Zacks spent the first half of his career trading equities and foreign exchange derivatives for a number of companies including UBS and Prudential-Bache Securities. He received a B.S. in Economics from the University of Pennsylvania’s Wharton School of Business.
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