FXTM information and reviews
FXTM
93%
IronFX information and reviews
IronFX
92%
Libertex information and reviews
Libertex
91%
FXCC information and reviews
FXCC
90%
Markets.com information and reviews
Markets.com
89%
FxPro information and reviews
FxPro
88%
EUR/USD
1.1726
BTC/USD
47 300.23
GBP/USD
1.3735
USD/JPY
109.9290
USD/CHF
0.9322
USD/CAD
1.2769
EUR/JPY
128.9017

Why automated trading will play an ever increasing role


6 September 2021

In the last two years, we’ve witnessed the rise of the retail trader as a genuine force in financial markets, where the collective flow of capital can move in unity and influence price and sentiment at any given time. The trend to trade Equity and Crypto has been heavily skewed towards momentum strategies and buying strength, selling weakness. While in FX markets, retail are predominantly mean reversion players. While their influence on the $6.6 trillion a day (turnover) FX markets is minimal, the opposite is true in equities and retail can aggressively influence single stocks when the flow is one way and targeted.

The next trend to be adopted by retail traders

Flow aside, we’ve all seen changing trends among retail traders, with behaviours evolving not just in the product mix, with Crypto and meme stocks getting incredible attention. But since March 2020 there's been a significant rise to trade less vanilla trading instruments and towards the use of optionality and derivatives, such as CFDs as vehicles to express a view. One thing is clear though, the financial literacy of the trading public has radically shifted and a broadening demographic are genuinely fascinated in trying to profit and grow wealth from the financial markets.

As we look forward, market participants are constantly evaluating what could be the next trend that will get the attention of retail traders. It could be an appetite for an emerging market thematic or towards a higher volatility sector, where expected returns are high. Or a trend towards a specific asset class, again, where the prospect of compelling returns contrasts to the perceived risk. Perhaps it will be technological advances that installs a belief that a trader has an increased edge.

Automated trading could play a far greater role in the future of retail trading

While this will be fascinating to watch, perhaps the real change we should be looking out for is changing trading behaviours – the systems and processes through which people trade, and the methods by which they enter and exit the market, as well as identifying and managing risk and emotion.

At Pepperstone, we’re seeing an evolution of our own among our global client base – that is, traders migrating towards automated or systematic strategies – where essentially traders are seeing the benefits of removing their own discretion in trading decisions and designing or downloading computer programs that enter and exit positions based on a set of pre-defined rules or conditions. These programs will be largely based on technical indicators, but they can be quant-based and range in the level of complexity.

This is a trend we believe is set to continue where the use of an algorithm or an automated process could play a major role in the future of retail trading. It will be a gradual process, rather than a sudden explosion in popularity like we’ve seen in Crypto, but our analysis suggests more and more traders will see the attractions of automating their trading.

For context, in July 2021, 39.07% of all client trades (across our full suite of products) were transacted by an automated system or an Expert Advisor. In July 2020 this percentage was at 30.3%. So if the trend continues, which we believe will be the case, we could see over half of our daily transactions placed using an automated strategy within 12-18 months. Interestingly, the duration of hold times for positions executed through an automated system dropped 7% and 44% over the past 12 to 48 months respectively, to a median duration of 100 minutes per trade. This is interesting as FX, gold and equity index volatility, the core factor that determines one’s time in the market, was well below average in July. The reduction in hold times suggests clients trading systems are becoming ever more sophisticated.

The next wave

The 2021 UK Investment Trends report showed the most important factor (from respondents) that could further their trading education, was content on automated strategies – with 40% of respondents saying they wanted content on automating strategies, this outcome was some 3ppt above the next most requested factor. Our own client survey and with a sample size of 1883 clients, showed 34.4% of respondents intend to automate their trading decisions in the future.

So why are so many seeing the attractions and migrating towards systematic trading?

Why not start your journey into automated trading – for many when you start exploring this world and community it will challenge the way you think about trading.

Take a look at Pepperstone’s Trading Simulator, Strategy Tester and Language Editor today and start your journey towards automated trading.

#source

Related

Olymp Trade's 7 Years of Super Trading
Olymp Trade's 7 Years of Super Trading

Olymp Trade's 7th anniversary will be marked by a unique trading tournament, the Super 7 Quest. Traders can manifest their superpowers and earn rewards!

17 Sep 2021

New Economic Calendar Feature Added to FBS Personal Area and Apps
New Economic Calendar Feature Added to FBS Personal Area and Apps

FBS, an internationally recognized online trading broker, has added a new Economic Calendar feature to its browser Personal Area and the apps: FBS - Trading Broker and FBS Trader...

17 Sep 2021

HotForex offers CFD Trading on 900+ DMA Stocks
HotForex offers CFD Trading on 900+ DMA Stocks

Traders with the internationally acclaimed multi-asset broker HotForex can expand their portfolio by trading CFDs on more than 900 DMA stocks - meaning they can place their...

16 Sep 2021

FBS Becomes Principal Partner of Leicester City
FBS Becomes Principal Partner of Leicester City

FBS, an international trading company, signed a partnership agreement with Leicester City Football Club. The partnership commemorates the mutual vision of the two teams by harnessing...

15 Sep 2021

DAX30 Index expansion
DAX30 Index expansion

A significant expansion is coming to the German DAX, the biggest reform in the index’s history. This change is effective from Monday the 20th of September. As a result...

15 Sep 2021

OctaFX introduces new currency pairs
OctaFX introduces new currency pairs

OctaFX is marking September as the month of the peso by introducing three new currency pairs. Beginning 13 September, the USDMXN, EURMXN, and GBPMXN pairs...

14 Sep 2021


Editors' Picks

OctaFX information and reviews
OctaFX
86%
HotForex information and reviews
HotForex
85%
XM information and reviews
XM
80%
FXCM information and reviews
FXCM
79%
Vantage FX information and reviews
Vantage FX
78%
Moneta Markets information and reviews
Moneta Markets
77%

© 2006-2021 Forex-Ratings.com

The usage of this website constitutes acceptance of the following legal information.
Any contracts of financial instruments offered to conclude bear high risks and may result in the full loss of the deposited funds. Prior to making transactions one should get acquainted with the risks to which they relate. All the information featured on the website (reviews, brokers' news, comments, analysis, quotes, forecasts or other information materials provided by Forex Ratings, as well as information provided by the partners), including graphical information about the forex companies, brokers and dealing desks, is intended solely for informational purposes, is not a means of advertising them, and doesn't imply direct instructions for investing. Forex Ratings shall not be liable for any loss, including unlimited loss of funds, which may arise directly or indirectly from the usage of this information. The editorial staff of the website does not bear any responsibility whatsoever for the content of the comments or reviews made by the site users about the forex companies. The entire responsibility for the contents rests with the commentators. Reprint of the materials is available only with the permission of the editorial staff.
We use cookies to improve your experience and to make your stay with us more comfortable. By using Forex-Ratings.com website you agree to the cookies policy.