Online trading: How Big Data is revolutionizing the world of finance

Online trading: How Big Data is revolutionizing the world of finance
The Siliconreview
29 April, 2020

Big Data is revolutionizing our approach to networks and digital strategies. The arrival of new data processing tools has enabled the trading industry to dramatically change the way it operates, but also to attract a wider audience.

The Big Data Phenomenon       

The quantitative explosion of digital data has forced researchers to find new ways of seeing and analyzing the world. It is about discovering new orders of magnitude in the capture, retrieval, sharing, storage, analysis and presentation of data. Thus the "big data" was born. It is a concept for storing an inexpressible amount of information on a numerical basis. According to the Association for Computing Machinery (or ACM) Digital Library Archives in scientific articles about the technological challenges of visualizing "big data sets", the term was coined in October 1997.

The arrival of Big Data is now presented by many articles as a new industrial revolution similar to the discovery of steam (early 19th century), electricity (late 19th century) and computers (late 20th century). Others, somewhat more measured, describe this phenomenon as the final stage of the third industrial revolution, which is in fact the "information" revolution. In all cases, Big Data is seen as a source of profound social upheaval.

Big Data and finance: a golden marriage

The mass data sector is booming and should be the measure of the decade ahead. The International Data Corporation estimated in 2016 that sales of mass data analysis tools would reach $187 billion by the end of 2019. Unsurprisingly, it is the finance and trading sector that is largely driving this revolution. The analysis of mass data makes it possible to analyze the prices of various assets automatically, but also to position oneself very quickly. In 2018, 80% of the world's transactions were generated by automatic trading. This corresponds to 60% of Wall Street trading. The days when trading was done exclusively manually are therefore long gone.

Democratization of online trading

This development is particularly noticeable in the area of online trading for private individuals. The latter now have many tools that act in their place. This is particularly the case with "turbo" certificates. They allow them to position themselves on the Forex or equity market very quickly as automated forex trading robots. They are also sometimes accessible 24 hours a day. We are also seeing the emergence of trading robots, which allow orders to be processed automatically and market trends to be analyzed.

These tools allow a growing number of individuals to learn how to trade, while maintaining a certain degree of caution. In the case of robots, Big Data is used to process data extremely quickly: they can place several orders per second. The craze is such that they will soon have to be regulated in the United States.

Analysing market sentiment                               

Until now, automatic trading options have failed to detect an intangible aspect of finance: market sentiment. This is the personal attitude of investors towards an asset or financial context, which can determine the future of certain investments. But the Big Data has also been there. There are now solutions that allow us to analyze tweets on a massive scale, or other means of communication in order to get an idea of the general sentiment of investors.

This makes it possible to build forecasting models that are applied to all markets. In Europe, for example, there are Eurozone sentiment indicators, which vary according to trade tensions and geopolitics. This also exists for emerging markets. For example, there are analyses of articles related to cryptomoney, which predict the interest of the general public in the subject.

Big Data is therefore taking a major place in the financial markets, especially online trading for individuals. Although a real knowledge of the field is still necessary in order to take advantage of the financial sector, big data tools remain a real help for the vast majority of traders.