Online Trading Academy Discusses the 5 Myths of Trading and Investing Technology

Mark Grieco for Online Trading Academy

Trading technology gets better, faster, and more refined with each platform upgrade and every tweak to an analysis tool. With such a dizzying amount of information coming at them from all sides, it’s easy for traders and investors to be distracted or become overwhelmed by fancy features and seductive shortcuts. While some of them may be useful, others can be quite costly to even the most experienced trader, both in time and money.

Here are five myths concerning trading and investing technology that you should probably leave in the land of market make-believe.

1. Myth: The latest and greatest bells and whistles equate to better trading and investing results.
Reality: Careful here. While they may resemble a Las Vegas slot machine, flashy features are not for everyone. Many analysis and trading platforms include features designed to entice the user to press the “trade” button. Placing trades due to excitement over a new feature could be a recipe for disaster. Trades should always be in line with your personal trading plan and especially within your personal risk parameters.

2. Myth: Speed is king.
Reality: Order execution speed doesn’t represent the total picture. Time and fill quality are additional factors to consider. Order type and duration add even more layers to the mix. The Securities Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) have established and enforced regulations requiring brokers to provide their clients with the “best possible order execution” on every trade. In fact, in December of 2019, online investing firm Robinhood was fined $1.25 million by the FINRA for not following “best execution” guidelines and practices. Be sure to have a conversation with your broker about their firms’ order execution policy.

3. Myth: More is more.
Reality: Actually, sometimes you may find that less is more and that simple holds an advantage over the advanced and wildly complex. Ask yourself: How many technical indicators do you need in a trading platform? How many market analysis tools can you use at once? How many order-entry features do you really need? Many technology offerings from the trading and investing industry attempt to lure-in users with the concept of “more”. Instead, embrace trading technology that’s intuitive and simple and offers features tailored to what and how you trade and invest.

4. What you see is what you get.
Reality: Be curious about what’s behind the curtain. The front-end technology you interact with isn’t always an indication of the whole experience. Make sure you do your own research about order execution, placing orders, and managing positions when the technology goes down and any other issues that you routinely run into with your trading. Customer service is also a concern; make sure there’s always someone to call or message when you need assistance or run into problems.

5. Myth: Now that no-commission brokers are the norm, it doesn’t matter what trading technology I use.
Reality: Ok, now wait just a minute. If a broker is no longer charging commissions, you can bet they are generating revenue through other means like payments for order flow, stock loans, interest on free credit balances, margin interest, and many other services and transactions. These fees have always been in place and are still in place. Do your research and understand all the charges your broker or technology provider can hit you up for.

Don’t let the non-stop pace of innovation in trading and investing technology bedazzle you — but don’t close your mind to them either. Understand what works for you and thoroughly test new features before you incorporate them into your trading plan. Remember, many of these new features and tools are introduced to traders and investors just to see if they stick. Just make sure you don’t get stuck.

Online Trading Academy (OTA) is a world leader in financial education for people who want to build skills and confidence for trading and investing in the financial markets. OTA’s proprietary and step-by-step Core Strategy methodology teaches strategies designed to help traders and investors make smarter decisions aligned with their short-term and long-term financial goals. Students learn from knowledgeable instructors, in an interactive classroom setting with extensive online education resources and a next-generation education, analysis, and trading platform called CliK. The courses are geared toward individual investors or traders, novice or experienced, who want to learn how to use techniques similar to professional traders on Wall Street. Founded in 1997 at a single location in Irvine, CA, Online Trading Academy has since expanded to more than 40 worldwide education centers and has served over 80,000 students with access to lifelong education who have rated their satisfaction at 94.4% from more than 200,000 post-class exit surveys. It all starts with a free introductory class.