If we took an honest look at the history of futures trading, we would see its roots stretching all the way to the Ancient times. It’s no surprise then that our perspective of futures is so closely related to busy “pits” where ambitious traders of all sorts place their bids for future assets. But, the digital wave is swiping everything in its way, and although good old pits are still alive and well, the futures market is undergoing the digital makeover that threatens to forever change its face.
Let’s take a look then at some of the most influential changes the digital futures trading platforms are bringing to the table and whether they can potentially reshape the market.
Low trading fees
First and foremost, it should be mentioned that digital futures trading platforms are considerably streamlining the trading process. For instance, in the previous decades, if you wanted to make a transaction, you would usually need to go through an army of brokers and clerks. This maze of middlemen commissions made the trading unnecessarily expensive. The digital trading platforms have eliminated all these unnecessary steps and allowed traders direct access to futures. As a result, the futures market has become more accessible to inexperienced investors.
Faster paced transactions
For the very same reasons we mentioned above, trading futures has become not only more affordable but also faster. Also, the time-frame in which transactions are executed has been cut to mere seconds. Although this change is definitely for the better, we have to mention some negative implications. Namely, much like stocks, futures are assets whose value is directly dependent on the volume of the orders that are being placed. The ability to perform a virtually limitless amount of these orders in a matter of second opens up the doors to potentially troublesome market swings.
Democratic trading environment
The digital revolution we are currently experiencing has become a great equalizer that has made relevant trading information widely accessible to all interested parties. For instance, the exchange of gold bullions that has long been performed in closed trading circles has become a public venture you can do from your PC with just a couple of clicks. Similarly, futures trading is slowly transforming from the type of transaction performed by faceless trusts behind closed doors to something much more inclusive, and democratic.
The threat of losing transparency
However, it would be hard to ignore that this wide accessibility creates some blind spots that could be potentially exploited. Although the old days of futures presented a lot of obstacles before the traders, on one thing we can agree – all the parties involved in the process were easily identifiable and accountable. These days, the market can be potentially destabilized with a high volume of orders with no one knowing where this fluctuation comes from. Even though such examples are incredibly rare, they do create a certain aura of uncertainty around the futures market.
The fresh opportunities for day trading
Day trading could be best described as the strategy of trading futures contracts within a limited 24-hour frame. At the end of each trading day, all positions need to be closed. Once the transactions have settled, the new day usually begins with different prices, which creates opportunities for new exchanges. As a result, traders are getting an incentive to place new orders and the market keeps going even during slower periods. This whole process is made considerably easier by the fact that transactions performed on digital platforms take very little time to envelop.
The potential for AI trading
Algorithmic trading is far from being a new thing – the issue has been discussed for years, and the influences of artificial intelligence are already present in real life. Still, with the rising potential of machine learning, this topic is growing in significance with each passing day. With these added layers of intelligence, computers will soon come into position to extract the patterns and recognize trading opportunities in real time. How big of an impact on the global economy this trend will eventually make remains to be seen, but one thing remains certain – the futures market will be affected by the change.
As we can see, although it’s still too early to call the day of trading pits gone, the futures trading is undergoing significant changes that will inevitably change the face of the entire market. Some of these changes are for the better. Others are creating soft spots that could potentially be exploited. Still, it’s hard to deny that the arrival of digital trading platforms gave the futures market a much-needed breath of fresh air and tools to remain relevant in years to come.
