By Shafiq Shabir, Head of Electronic Trading at Intertrader

The shops and restaurants have reopened, the vaccine rollout continues at speed, and even holidays abroad seem to be taking place once more. While it might seem like all has changed on the surface, the pandemic’s long-lasting impact is still visible everywhere around us.

Nowhere is this better seen than in the world of online trading. The pandemic’s new breed of “armchair” investors continues to invest their savings in the search for financial gain in the marketplace. The GameStop, AMC and Support.com Reddit rallies, which have seen retail investors pit themselves against hedge fund shorts, seem no longer a momentary blip in financial markets but the precursor to a much wider shift in the way people invest in and access financial markets.

Reacting to these tailwinds, online trading platforms will need to be nimble in their approach to keep up with investor demands. Retail investors should prepare themselves for an upheaval in products and features over the coming years as the online trading revolution continues to grip markets.

The rise and rise of social trading

Within the lexicon of Covid-19, we have seen the emergence of “FOMO investing”. Addictive and attention-grabbing, the fear of missing out (FOMO) has spurred a number of retail investors to invest like never before in an attempt to achieve financial riches from financial markets.

Underpinning FOMO investing is a demand from retail investors to keep up with peers and gain wealth from quick trading. In addition, market noise from commentators across TikTok, YouTube, and the media is influencing investors’ decision-making. This trend will only accelerate in the years to come as those who have caught the investing “bug” fear missing out on potential gains and rely on signals from peers to meet these ends. We are seeing an online trading community emerge which is now able to move markets.

Already, this movement is powering a shift in online trading. A number of platform providers are now enabling users to take part in copy trading, which allows regular investors to automatically copy the trades of the platform’s leading traders. Investors can also connect with other traders to chat, trade tips and benefit from their expertise.

This form of social trading will continue to dominate online trading as everyday investors look to peers and non-traditional forms of market information for investing tips and ways to achieve future financial gains. This development will no doubt become widespread across the market in years to come.

Faster, better and stronger online trading

Adapting to the needs of investors will also see online trading become faster, better and stronger. Everyday investors will be looking for reliable systems with a user experience that enables faster trades as well as easier deposits and withdrawals.

This demand for a better user experience from retail traders will be front of mind for platform providers. Memories of last year’s “Covid bounce” will weigh on platform providers’ minds as they remember the announcement of the Pfizer vaccine leading to online trading platforms such as AJ Bell and Hargreaves Lansdown being unable to cope with the surge of trading.

In the battle to gain and retain clients, prolonged outages will be remembered by everyday investors who want reliable and secure systems from brokers in order to capitalise on market movements. Here, online trading platforms will have to adapt to growing investor demands to ensure a first-class user experience for retail traders.

The opportunities remain endless for online trading

While we predict improvements to the trader user experience and the growth of social trading over the mid-term, the opportunities remain endless for online trading whilst investors remain interested in the markets. This will also include the need to educate this new breed of traders and support them in their investment journey to ensure informed decision-making – whether the basics of trading strategy or ways to mitigate risk.

Brokers will be keen to keep the new crowd of retail investors engaged and rising to this challenge will separate the best from the rest. Data and automation will no doubt be features of this race as the customer journey is made easier for traders, and investors demand the latest information at their fingertips before making decisions. In addition, there will also be a role for the regulator in protecting retail traders who are inexperienced in investing. Too often we only hear about the good stories when over 70% of retail investors lose money.

The pandemic has served lessons for every industry and this is equally seen across online trading providers. The FOMO trading phenomenon during the lockdowns taught brokers about the power of retail trading in the financial markets. The onus now is on brokers to keep up with growing demands from retail traders.

Yet, while it might feel like we have already seen a revolution over the last 18 months in financial markets, there is more to come as platforms and brokers evolve and harness the power of technology to improve retail traders’ market access and trading experience.