Trading is a profession with a long history, but modern technology has caused it to experience profound changes. This is particularly the case when it comes to day trading, which has seen a significant demographic shift.
Recent has shown that 18-to-34-year-olds now account for 65 percent of all online traders in the UK, a figure that has increased year-on-year since 2015
Recent research from BrokerNotes has shown that 18-to-34-year-olds now account for 65 percent of all online traders in the UK, a figure that has increased year-on-year since 2015. At the same time, the proportion of traders over the age of 45 has dropped, marking a clear shift towards a younger demographic.
Another interesting shift is that women are gradually becoming better represented in the industry, with statistics showing that one in 10 of all traders are female. This change cannot come fast enough, especially considering recent research by behavioural economists, who have found that men’s hyperactive trading makes them statistically inferior traders to women.
To discover more about the transformation, World Finance talked to Ricardo Evangelista, International Desk Manager at ActivTrades, a leading online broker providing trading services in forex, contracts for difference and spread betting.
Percentage of UK online traders aged 18 to 34
Percentage of traders aged 18 to 34 who trade cryptocurrencies
What key factors are driving this change?
For one, some brokers have been actively targeting a younger audience. But analysts have also attributed the age shift to the emergence of cryptocurrencies, which has been a major talking point in recent years. In response to their rising popularity, brokers have introduced a range of new currencies to the market, such as bitcoin and Ethereum. This appeals to a younger audience, especially when you consider that some 75 percent of traders aged between 18 and 34 years old are said to trade cryptocurrencies. There are also technological changes to consider. Advances in digital communications and mobile devices have radically altered the trading landscape, making trading far more accessible and enabling traders to open a position at any time – even when they are on the move. Notably, mobile trading makes up almost 60 percent of all transactions.
What has been your experience of this change at ActivTrades?
ActivTrades offers informative educational resources to clients with varying experience and understanding of the financial industry, from beginners to professionals. This in itself is notable given that, in the past, most traders had advanced knowledge of the industry.
The demographic shift is also something that we have seen clearly at ActivTrades. We have responded to the shift by introducing a wider range of products to match the interests of the new day trader demographic. These are traders who are drawn to investments like cryptocurrencies and cash indices.
ActivTrades has also utilised technological advancements to ensure it offers products and services that complement its clients’ everyday lives. Useful extras such as its mobile and tablet trading app allow clients to place trades on the go.
What does this mean for the industry more generally?
A shift towards younger and less advanced traders has prompted changes in the regulatory landscape, with regulations providing enhanced safeguards to protect retail traders. ActivTrades offers a negative balance policy, which credits client accounts back to a zero balance if their account goes into negative as a result of trading, along with additional insurance up to £1m ($1.4m).
The Financial Services Compensation Scheme is a fund of last resort for customers of UK-authorised financial services firms, which provides protection for when an authorised investment firm is unable to pay claims against it.
These assurances have empowered individuals and made them feel safer while trading. What’s more, demo accounts give clients the opportunity to get accustomed to the platform, products and requirements, without making an investment of their own.
Do you see the demographic continuing to change as time goes on? In 10 years’ time, what changes can we anticipate?
It is difficult to predict exactly how it will play out, but the data mentioned previously would suggest that the shift could continue to some degree.
What is ActivTrades’ stance on the European Securities and Markets Authority changes that are due to come into force?
It is our stance at ActivTrades that any changes that promote customer experience, education and protection are positive. However, our latest research tells us that the majority of our clients are well aware of their actions. Therefore, some of them are starting to consider these decisions as an intrusion or a limitation to their freedom of investing in financial markets. Ultimately, the worst thing would be if the new regulations drove customers away to less-regulated markets.
Some argue that regulatory changes will stem industry growth. Do you share this view?
An increase in regulatory guidelines will improve the reputation of the industry, if anything. ActivTrades expects to see its own growth continue, due to the exceptional support and products we offer globally.