Author: Anastasija Ivancova
Date of Publication: 17/12/2022
There is an expression about trading: Any next generation will find it more difficult to make money on the stock market than the previous one. In fact, trading is gaining popularity, but it also raises a lot of questions. Is it still a relevant way to make money or will trading eventually die?
Has it become harder to make money on the market?
What does this mean? It's simple. The amount of earnings per level of trading has fallen. This applies not only to short-term trading itself, but also to active investing. Actually, it means that there is less to lose in the markets. Traders have become smarter, they stopped investing thoughtlessly, and weigh their risks. How does it work? Someone's profit is always someone else's loss. So surely, people continue to lose and many continue to lose even millions.
What would a market where only professionals remained look like? It will be like a market in which no one can make money. Well, only the market itself would make money on commission. Everyone became "defensive," covering up the risks. So, someone wanted to make money, attack, remove their risks - misses.
What will trading look like in the future?
The main topic of discussion about investments and markets regarding the future of trading is the robotization of this sphere. The level of IT and artificial intelligence will melt away at breakneck speed. However, no one doubts that algorithmic trading will gain momentum.
How realistic is this prospect? Large funds put a lot of money into IT and data science, and it indicates that more will be investing in cryptocurrency stocks, the trend will grow. Yet everyone will act too carefully. It is likely that in the future solid investment companies will fire all of their traders and replace them with robots and programmers, who will manage the robots. Therefore, competition in trading will turn into something like this. It isn’t traders that compete, but robots and technology that can predict the success of the stock market. However, at the level of the average "solo" trader, the prospects look even worse. This is because solo traders won’t be able to afford the kind of technology that trading companies will buy.
HFT systems a threat to trading?
HFT-systems are robots for high-frequency trading, which replace the trader in trading. But it is a myth that it can threaten the trader. Yes, there will probably be problems with technical analysis - robots can change the course of the market at any time. A human cannot predict a robot's decision and it has no time to react to market changes. Actually robots crush the market with volumes - but robots only "inflate bubbles".  So, robots can only out-compete short-term traders. Short-term traders lose to HFT systems and incur additional commission losses on short trades whereas long-term investors don’t suffer from this.
So is the trading profession going to die?
Of course, it's not all that pessimistic. As long as the big investment companies compete with purchased technology, solo traders will still be able to use human-only trading methods. At least this will continue until artificial intelligence is trained to think like a human.
Analysts predict that the full algorithmic and robotic trading of the future is still many years away. Robots have influence in short-term trading, while in the long term the success of trading will be influenced by fundamental factors. Artificial intelligence will not be able to predict these factors. That's why trading will remain a relevant way to make money for decades to come. FxCash predicts that you'll be able to make money on trading for 2-3 decades. However, it's just that it's going to be a little bit more difficult.