From Traditional To Technological: The Rise Of AI And Zero-Brokerage Empowers Investors
If you are a movie buff, and even if you are not, it is quite easy to recall the chaos of open outcry financial market scenes in movies like Guru and Margin Call. They capture the original essence of trade markets, where buyers and sellers would be frantically gesturing or shouting across the trading pits to signal their choice of buying or selling. In one of the scenes in Margin Call, a trading floor is full of people waiting for the clock to strike 9, and the moment it does, chaos is unleashed. It is a reminder of how far stock trading has come over the centuries.
The conceptual base for modern-day trading can be traced back to the 17th Century Amsterdam Stock Exchange, one of the earliest stock exchanges in the world, which facilitated the trading of shares of the Dutch East India Company. The rising popularity of stock trading gave way to the setting up of formal stock exchanges like the Bombay Stock Exchange on Dalal Street, the first stock exchange in Asia in 1875 to get recognition under the Securities Contract Regulation Act 1956. The setting up of formal stock exchanges regularized stock buying and selling during the designated trading hours and rules.
In the 20th century, stock trading was revolutionized with the advent of technology. By the 1970s and 80s, electronic trading systems began replacing the traditional outcry method, and computer-based systems enabled faster and more efficient trading. Online trading platforms began to emerge by the 90s and during the 2000s, completely revolutionizing trading and investment. Before online trading and app-based investments, the sector was marred by high brokerage rates. Thanks to technology and the internet, today, investment and trading applications have democratized the sector with zero commission to book trades.
How Did People Know Where To Invest?
Apart from their own research, earlier traders were dependent upon stock analysts or research analysts and media coverage to make investment decisions. A research analyst often helps retail clients with valuable insights and recommendations after conducting thorough research and analysis of various financial instruments like stocks, bonds, mutual funds, etc. While relying on research analysts is one option but as one spends more time engaged in the financial market, it becomes more important to conduct fundamental and technical analysis.
Fundamental analysis means delving deep into the company stock, comprising assessing securities using financial, quantitative and qualitative elements enabling you to determine the intrinsic value of a stock. The technical analysis primarily relies on the price movement of a specific stock to formulate strategies. The majority of technical analyses aim to ascertain the continuation of an existing stock trend while also evaluating potential indications of an upcoming reversal.
To conduct both kinds of research, retail traders were also dependent on the reports from research houses recommending stocks. In the last few years, various tools, including charting libraries, have been available to retail clients in active trading.
Even if there has been huge content around various indicators, tools and knowledge in trading, it still requires a lot of research, time to learn and back-test. Along with all these factors, market volatility and some unforeseen situations demotivate more people to participate in the capital market.
Artificial Intelligence To Solve Investor Challenges
Artificial Intelligence (AI) has been a game changer in the stock market. Directly or indirectly, today, it’s being used everywhere by almost everyone. The realization that AI can be applied to several aspects of finance, ranging from Trading platforms to Credit Scoring to Loan Underwriting and even Wealth management, has opened the floodgates of opportunities to smoothen operations and analytics. AI can crunch millions of data points in real time and can capture the information in seconds, which wasn’t possible with the current statistical models. According to recent news, online trading is expected to be valued at around USD 12 billion by 2028 because of AI.
In trading and investing, AI is helping to analyse stock and it adds tremendous value by collating and classifying data to draw relevant outcomes. It examines each scrips' unique behaviour in order to forecast movements and signals that have an effect on investment decisions, and to present relevant information to investors.
The AI-powered insights help investors and retail traders make better decisions. It shortens the research process, increases precision, detects trends, and lowers overhead expenses. There are several domestic and international entities that offer data points across a wide range of asset classes. However, India now has its first digital trading platform that can predict movements of indices and about 60 stocks every day, from 1500 scrips and across six different horizons, giving a huge boost to investor confidence.
The intricacies of the capital market make it highly complicated. So the focus of AI-powered predictive tools are on empowering humans to make better investment decisions, rather than replacing them. While algorithms heavily rely on market data and help remove notions & biases, they may overlook numerous elusive opportunities that only the human mind is skilled at recognizing.
Conclusion
In conclusion, the evolution of trading has been propelled by various technological advancements, and today, AI is at the forefront of revolutionizing this industry. The accessibility of such an AI-based trading platform in India has democratized trading, empowering retail investors to leverage analytics and make intelligent choice with analysis of stocks, sectors, and indices. As AI continues to evolve, its impact on the trading landscape is set to grow, shaping a more inclusive and data-driven future for investors of all levels.
