Article

How Stock Market Trading is Different from Earlier Times- It’s All DIY Now!

27 Sep 2019

If Rip Van Winkle had been a stock market trader and woken up in 2019 after slumbering for more than 20 years, he would surely be in for a culture shock. The trading landscape has changed drastically in the last 20+ years almost to the point of being unrecognizable. In fact, have you imagined how Rip Van Winkle would have been trading more than 20 years back?

How Rip Van Winkle would have typically traded in the 1990s?

A typically trading day in the life of Rip Van Winkle would be something like this.

  • Check with the broker if the margin cheque has been cleared and funds have come into the account.

  • Call up the dealer sitting on the terminal to buy 1000 shares of Reliance Industries.

  • After failing to get any response from the dealer for 15 minutes, Rip Van Winkle walks across to the broker’s office, sits in front of the dealer and gets the order executed. It gets done at Rs.8 higher than his intended price.

  • He chooses to take delivery of the shares so the broker gives him the physical certificates after a week with a transfer deed form.

  • Rip Van Winkle then sends these certificates to the company for transfer into his name with the TD but the company sends it back as bad delivery.

  • He goes to the broker and gets the bad delivery rectified and again sends the shares for transfer. Finally, it gets transferred to his name and gets delivered.

  • In the entire process more than a month has been lost and the investor has perhaps lost many price opportunities in between.

7 market shifts since 1990

Between the mid 1990s and today, the market has changed substantially and trading has become a lot simpler and transparent. Here are six shifts that would have shocked him.

  • Shares are not traded physically any longer; it is all in demat form in your demat account

  • One can open a demat account online in minutes, deposit funds instantly, and start trading

  • Badla and carry forward systems are gone and now it is all about futures and options

  • There is detailed verification done before you can open a trading account

  • Markets graduated from screen trading to internet trading to app based online trading

  • Waiting period for shares has come down to just two days

  • Information and research is a lot more democratic and freely available

The biggest shift is in the use of technology

Imagine if you had gone to sleep in the mid-1990s like Rip Van Winkle, you would have missed almost all the major technological shifts in trading. These include the PC ownership revolution, the computing revolution, the internet revolution, the smart phone revolution and the artificial intelligence shifts.

The telecom spread and better computing capacity made internet trading possible. Now traders and investors could place orders from the comfort of their homes and get best prices. This largely enabled a more democratic approach to trading in the markets.

The second big shift happened after 2007 when mobile phones made a big difference to trading. The introduction of smart phones by Apple and later by Samsung and other players ensured that access to smart phones was not only efficient but also affordable. This created the second big revolution consisting of apps and app based online trading. Now, you do not even require a PC or laptop to trade. You can trade with your mobile phone with all the possible features optimized and keep in touch with your trades on the move.

The third big shift was triggered by the spread of low-cost broking or no-frills broking. This shift started from 2010 onwards and has really caught on in a big way in the last few years. As the discount brokers started proliferating, the need was felt to differentiate and brokers now offer screeners, planners and customized options for traders that are based on artificial intelligence, machine learning and big data. This ensures that meaningful and workable solutions are delivered to trading customers at the lowest cost possible. This could be the big trend going forward.

Time to smell the coffee; Rip Van Winkle

The shift towards Do-it-yourself investing is a trend whose time has come. The Rip Van Winkles of the trading world need to reconcile that the shift has happened and the shift is for good. It is time to wake up and smell the coffee!

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How Stock Market Trading is Different from Earlier Times- It’s All DIY Now!

27 Sep 2019

If Rip Van Winkle had been a stock market trader and woken up in 2019 after slumbering for more than 20 years, he would surely be in for a culture shock. The trading landscape has changed drastically in the last 20+ years almost to the point of being unrecognizable. In fact, have you imagined how Rip Van Winkle would have been trading more than 20 years back?

How Rip Van Winkle would have typically traded in the 1990s?

A typically trading day in the life of Rip Van Winkle would be something like this.

  • Check with the broker if the margin cheque has been cleared and funds have come into the account.

  • Call up the dealer sitting on the terminal to buy 1000 shares of Reliance Industries.

  • After failing to get any response from the dealer for 15 minutes, Rip Van Winkle walks across to the broker’s office, sits in front of the dealer and gets the order executed. It gets done at Rs.8 higher than his intended price.

  • He chooses to take delivery of the shares so the broker gives him the physical certificates after a week with a transfer deed form.

  • Rip Van Winkle then sends these certificates to the company for transfer into his name with the TD but the company sends it back as bad delivery.

  • He goes to the broker and gets the bad delivery rectified and again sends the shares for transfer. Finally, it gets transferred to his name and gets delivered.

  • In the entire process more than a month has been lost and the investor has perhaps lost many price opportunities in between.

7 market shifts since 1990

Between the mid 1990s and today, the market has changed substantially and trading has become a lot simpler and transparent. Here are six shifts that would have shocked him.

  • Shares are not traded physically any longer; it is all in demat form in your demat account

  • One can open a demat account online in minutes, deposit funds instantly, and start trading

  • Badla and carry forward systems are gone and now it is all about futures and options

  • There is detailed verification done before you can open a trading account

  • Markets graduated from screen trading to internet trading to app based online trading

  • Waiting period for shares has come down to just two days

  • Information and research is a lot more democratic and freely available

The biggest shift is in the use of technology

Imagine if you had gone to sleep in the mid-1990s like Rip Van Winkle, you would have missed almost all the major technological shifts in trading. These include the PC ownership revolution, the computing revolution, the internet revolution, the smart phone revolution and the artificial intelligence shifts.

The telecom spread and better computing capacity made internet trading possible. Now traders and investors could place orders from the comfort of their homes and get best prices. This largely enabled a more democratic approach to trading in the markets.

The second big shift happened after 2007 when mobile phones made a big difference to trading. The introduction of smart phones by Apple and later by Samsung and other players ensured that access to smart phones was not only efficient but also affordable. This created the second big revolution consisting of apps and app based online trading. Now, you do not even require a PC or laptop to trade. You can trade with your mobile phone with all the possible features optimized and keep in touch with your trades on the move.

The third big shift was triggered by the spread of low-cost broking or no-frills broking. This shift started from 2010 onwards and has really caught on in a big way in the last few years. As the discount brokers started proliferating, the need was felt to differentiate and brokers now offer screeners, planners and customized options for traders that are based on artificial intelligence, machine learning and big data. This ensures that meaningful and workable solutions are delivered to trading customers at the lowest cost possible. This could be the big trend going forward.

Time to smell the coffee; Rip Van Winkle

The shift towards Do-it-yourself investing is a trend whose time has come. The Rip Van Winkles of the trading world need to reconcile that the shift has happened and the shift is for good. It is time to wake up and smell the coffee!