Trading Skills Will Become Highly Relevant as Technology Advances

April 02, 2017 06:00

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Dear Traders,

Technological improvements continue to change and challenge the landscape around us. The advancements in robotics, IT, and automation are accelerating with no sign of slowing down in the near future.

This raises questions for the world of financial markets and trading – will trading remain relevant in such an environment? And how will technology impact the world of trading financial markets?

This article reviews the role of trading, traders, and the financial markets themselves within a more technologically advanced world.

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The impact of technology advancements

The goal of this article is not to debate whether and how current and/or future technological advancements and breakthroughs will impact the economy and society. It remains difficult to forecast the likelihood of such trends and to assess the depth of their impact so I will let others take the lead on this discussion... but here are some examples of technology advancements during 2016 and how they can impact all of us.

This article focuses on one particular angle: will trading, traders, and the financial markets remain relevant if technological changes do occur?

The answer is yes and no and depends on the time frame. I will share my view, but please keep in mind that the topic is wide and open to debate. Therefore I would highly welcome your comments, feedback, questions, and opinion on the matter. Together we will understand more.

Impact on traders, trading, and the financial markets

Technology is often a double-edged sword, which also holds true for its potential impact on traders:

  1. On the one hand, new technology could lead to dozens of known and unknown benefits and opportunities for traders.
  2. On the other hand, new technology could lead to known and unknown disadvantages for traders.

Opportunities: it could offer traders, for instance, enhanced tools and indicators for improving their trading decision or expert advisors could assist traders in a wide range of areas. Other advantages include faster connections to the market and enhanced trade executions.

Disadvantages: algorithms could, for instance, become stronger and more difficult to obtain, perhaps leading to an increase of robotic traders and a decrease of human traders.

In my view, the financial markets are primarily driven by:

  1. Emotions and trends in the short-run.
  2. Fundamental factors in the long-run.

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Investors, traders, and market participants responses and behaviour toward market movements are overly emotional, which causes the financial markets to extend beyond a rational point and hence become irrational.

Traders can capitalise on those irrational moments, because they can spot patterns, understand the market structure, and assess whether participating in the financial markets gives them an edge.

Surely, robots are already active in the market now and will claim a key role in the future too. Currently there are many algorithms tackling the markets and their numbers have been growing.

Human traders, however, will remain relevant too - at least for a substantial time. Humans and robots could even end up working closer together like a team (similar to chess where the best teams are now combinations of humans and robots).

Above all, acquiring trading skills could be a very important skill to have or develop in the upcoming two to three decades. Why? Let me explain….

My opinion on trading skills

The technological impact on the field of trading is only one part of the story. Technology can also influence our lives in many different ways.

Advancements in the field of automation, robots and IT could severely impact the costs of and the efficiency in the production of goods and the delivery of services. This, in turn, could hit the employment market, where jobs could become susceptible to redundancy.

In my view, trading and technical analysis have already been useful skills in the past, as well as nowadays, but they could be more important than ever in the future. Check out our expanded video on learning to read the market structure:

Why?

Simply said, I think developing, improving, and maintaining trading skills is a good strategy.

This way, traders are already working on the ability to earn a potential stream of income that is not dependent on the job market and employment situation.

In any case, traders are working on an unique skillset – analysing and trading the financial markets – that could generate long-term benefits:

  1. Trading skills offer traders a possibility to earn alternative income besides their current full-time or part-time job.
  2. Trading skills offer traders an independent route if jobs become more scarce, and a way to earn (extra) income that does not come from labour and the job market.
  3. Technical analytical skills benefit long-term investing decisions too.

Perhaps the thinking is too pessimistic… But being prepared never hurt anyone.

I believe that technical analysis and trading skills will become an even more valuable skillset now as well as in the near future, at least for the next 10-30 years. Feel free to join our webinars where we discuss changes in the market more closely. Also, check out our short and expanded video on learning to read the market structure:

Do you agree or do you have a different view? Please share your thoughts in the comment section below.

Cheers and safe trading,

Chris

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