Digital transformation in trading: Navigating the future of investments

From the time when traders had to connect with brokers and be present at exchanges to execute a trade to today when a trade can be executed as quickly as with a click of a button on a smartphone, the trading world has transformed tremendously.

The progress in trading is not limited to executing a trade. In fact, traders don’t even have to spend as much time burying their heads in heaps of documents anymore, especially with advanced analytical tools that don’t require manual research. Traders have to access real-time market insights, predictive analytics and resources to identify market trends. In India, traders and investors have embraced tech-backed tools and leverage them for efficiency and precision while trading and investing.

Specialized trading platforms provide new-age analytic tools that enable traders and investors to resolve their research-related woes. They streamline the research process and present key insights. These tools also help evaluate a company’s fundamentals and its potential to grow and draw comparisons with the competition, all through your smartphone.

Some of these fundamental tools include Earnings per share (EPS), which shows the company's profit per share. Another tool is Return to Equity, which helps identify how efficiently a company generates profits based on investments. Simple Moving Averages (SMA) help to know the average of the stock prices. Candlestick charts offer a visual presentation of the open, high, low, and closing prices, or Aroon Indicators enable traders to measure the trend of the stocks.

Investors have the power of data available at their fingertips, which makes them empowered, educated and more intuitive. From the macro perspective, technology has significantly impacted retail participation in the stock market. It has resulted in the democratization of the capital market as the share of retail participation increased to 45% in FY21 on the National Stock Exchange (NSE). With this milestone, retail investors accounted for over 40% of the total trading turnover in a fiscal for the first time.

Role of AI in stock analysis

Trading platforms offer streamlined interfaces and user-friendly navigation enabling traders to concentrate on the most important aspect: making well-informed investment choices. However, the real game-changing factor is artificial intelligence (AI) integrated into the platform's algorithms.

Do you remember instances when you purchased a stock with high hopes, only to witness its rapid decline shortly after that? We've all encountered such situations, and they are not good situations to be in. But by leveraging AI, platforms can help meticulously analyze historical market data, detect recurring patterns, and forecast potential price fluctuations precisely.

For instance, you are contemplating an investment in a tech company that has made a lot of noise in the market. Within trading platforms, unprecedented AI-driven stock analysis tools delve into years of historical data, thoroughly assessing the company's performance during comparable market circumstances.

Subsequently, it provides a probability rating, indicating the likelihood of the stock's value during a specific time span. Equipped with this, traders are empowered to make a judicious decision that is aligned with their risk tolerance and investment objectives.

Conclusion

The Indian stock market has evolved significantly with technological advancements. The industry players have been at the forefront of adopting these advancements and offer traders and investors solutions to simplify the processes. Trading platforms have leveraged AI, big data and other advanced technologies to simplify the lives of traders.

As the technology progresses, trading platforms will further enhance customer experiences by providing state-of-the-art tools. Meanwhile, traders and investors must leverage these tools to generate wealth through informed decisions.

-- Sarvjeet Virk, MD and Co-founder, Finvasia.