Latest trends in retail trading

Author: Albina Zhdanova

There is hardly any industry that is as high-paced, ever-changing, and simultaneously conservative as trading.

The way retail trading works today is drastically different from what it was even five years ago. Today, we’d like to take a deep dive into the realities of modern retail trading, identify the current trends, and see where it’s leading us.

How retail trading is changing: a trader’s perspective

There are a few undeniable trends that affect most retail traders these days:

#1 Accessibility of trading

One thing that has definitely changed in the trading landscape is the entry barrier. It’s never been easier for ordinary traders to participate in trading and investing. Even the most strict and conservative markets now offer user-friendly apps and platforms for trading. It’s no longer something only the elite have access to, but rather a financial instrument available to anyone. Trading is actively encouraged by societies and governments alike to be utilised for one’s own financial security and retirement.

#2 Pursuing work-life balance

There is an undeniable trend of focusing on work-life balance. The new generation finds it tiring and depressing to work most of your life and have to wait to start living until you retire. Yet, with the cost of living crisis and stagnant wages, achieving a work-life balance and maintaining a decent quality of life is not getting any easier. Many turn to investment or trading to capitalise their savings and make money work for them. They follow the “work smarter, not harder” idea and are the ones who are the most interested in education and improvement.

#3 Financial influencers

We are living through the boom of content creators. There is a huge market for influencers, and financial gurus are making banks share their tips and financial journey with their audiences. There are good and bad sides to this phenomenon. On one hand, all these influencers are helping educate their audience on trading principles, engaging more people in the field and helping brokers get more clients. On the other hand, there is no strict control and verification of what is being said online, which means that at least some new traders will be given poor advice, resulting in them making mistakes and losing money. One might argue that most trading creators put a disclaimer that they’re not giving financial advice, but it’s quite obvious that they’re still considered knowledgeable experts who can be trusted.

#4 AI assistance

The trading world has always been prone to utilising technology to maximise profits and minimise risks. EAs, or expert advisors, are software programs that many traders employ to automatically execute trades, following predefined rules or chosen strategies.

The recent AI boom is taking it to a whole new level. Now traders can use it to run analysis of the markets, spot patterns, and forecast what the future may hold. There is a lot of excitement around artificial intelligence, but some concerns have been raised too. First of all, how ethical is it to leave trading to the computer? Also, how well can the current AI that’s widely available do its job? It’s still unclear how much more beneficial it is compared to traditional “human” trading, but just like any new disruptive technology, AI will continue to be the centre of attention and the source of plenty of experimentation too. With time, the growth of AI and the newly accumulated knowledge will result in a revolutionary change in trading. Unfortunately, we’ll have to wait and see when that happens.

#5 Revival of Prop Trading Firms

In early 2024, the future of prop trading 2.0 was hanging by a thread. Complications with licensing and regulatory compliance shook up the industry right when it was at its peak. A few months later, we saw that a compromise had been found (knock on wood). There are some movements and agreements in how prop trading companies must be regulated, and the companies themselves have improved their already sophisticated risk management strategies by diversifying to multiple markets and technology platforms.

From the traders’ perspective, a lot of the shuffle was kept behind the scenes. Sure, some prop trading firms paused operations, but mostly, they’ve maintained their normal scheduling, so traders can participate in tournaments and practice their trading skills.

Prop trading has been a huge trend for the past year and a half, and it looks like it’ll continue to be so. For traders, it’s a safe yet educational way to learn about and improve their craft, and the best ones expect to be provided funds by the company to trade for a commission. Going back to our work-life balance point, this is a perfect opportunity to add value to the days of those working 9-to-5 but who are willing to expedite their wealth accumulation.

How retail trading is changing: a broker’s perspective

Traders are not the only ones who are dealing with a changing landscape. For brokers, hedge funds and prop trading firms, there are also plenty of changes.

• Industry growth and the expansion of products and services offered create new opportunities, but they can also push yesterday’s market leaders to the side if they’re not prepared for change.
• The user experience is key. People have a very low tolerance for cumbersome solutions and complex interactions with a company’s representatives. Every aspect of working with a brokerage must be simple and straightforward, or else clients will move on to someone else.
• Demand for educational content. Educational content, as a whole, has been plentiful in the trading world lately. People want to know more and understand how everything works, so they crave and actively consume articles, videos, and podcasts about retail trading. Financial influencers are quickly filling up the vacuum, but brokers are trying to keep up too.
• Compliance challenges are becoming more prominent. While compliance as a whole is desirable for the industry (it keeps us all safe, after all), the slow pace and somewhat outdated initiatives that are introduced at times create additional roadblocks for a short period of time. Brokers, and the industry as a whole, need to embrace regulations and learn to cooperate with institutions to create strict but fair guidelines that will help trading grow and expand.