Defining and Targeting the Active Trader

The frequency of individuals’ trading, and the processes that inform these trading decisions, vary greatly across today’s global markets. Aite Group, a research and consulting firm for the financial services industry, conducted two separate quantitative surveys in six target countries (US, Canada, Japan, Russia, Brazil and India) in November 2013 to better understand self-directed trading trends within each of these nations.

While the overall retail trading population in the United States doubled over the past decade to 46 million brokerage account holders, Aite Group’s study found that 30% of traders with activity during the previous 12 months placed on average 3 or more trades per month. During the past three years, however, the overall number of those with a self-directed retail trading remained flat, in part due to the investors’ need for job security in a rebounding economy, according to Aite Group’s findings.

Additionally, the November 2013 study indicated that the majority of those power-trading (placing an average of 10 or more trades per month) any asset class in the US did so trading stocks, ETFs, and options, while FX and futures trading lagged in popularity. Over the 2005 to 2013 period, however, US brokerage annual revenue from Options trading doubled from $439 million to $878 million.

Aite Group’s survey further evaluated the comfort level among the very active traders (those placing 500 or more trades per year) and found that more than half of them are satisfied with their trading frequency, while 33 percent would be willing to trade more under the right conditions:

Source: Aite Group

Today’s modern retail traders are changing rapidly, and the process by which traders enter and manage their position in the market is also evolving. According to Javier Paz, Senior Analyst at Aite Group, traders are looking for trading interfaces that help relieve the burden of data analysis and make better use of their time to find attractive trading opportunities. Not surprisingly, the younger and tech-savvy Gen-Y population was at the forefront of traders having lower tolerance for overly complex trading technology and time consuming processes.

In Aite Group’s survey, power traders identified the following as one of the “Top 2” most critical features needed for advanced trading platforms:

  1. Advanced options trading functionality – 20%
  2. Access to reliable historical market data – 18%
  3. Ability to perform back-testing and profitability studies – 16%

Technology plays a critical role in increasing the number of active traders and power traders in today’s market and firms should continue to invest in solutions that promote trading activity. According to Tony Zhang, Head of Product Strategy, OptionsPlay®, current trading platforms offer a fragmented and time consuming user experience that requires traders to travel across multiple sites for information before making a trading decision. OptionsPlay Ideas, available as a standalone solution or through the Scivantage Investment™ Platform, uses a single-screen format to present all of the information needed to make a trade, thereby providing traders with fewer distractions and higher trade efficiency. According to Zhang, this not only benefits the trading experience, but also has a high ROI for firms: through a streamlined trading process, trading volume increases, thereby bringing in more revenue.

For more information on Aite’s recent research, click here.

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