Are Trading Apps The Future?

December 6, 2016


Look around on your morning commute and you'll see literally dozens of people, swiping, tapping or flicking on games like Candy Crush, Angry Birds or some other app. Instead you could be earning cash by trading real world stocks on any one of a dozen trading apps.


Are these apps giving mass appeal to high finance? or are these just Wall Street themed gambling apps? 



You may fancy yourself as the next Gordon Gekko or Jordan Belfort, but we hate to tell you this....Stock trading isn't easy.


Most trading apps make money in interest fees on cash balances and interest from margin lending (money borrowed from them to invest in Shares). Interest fees on cash balances encourage a portfolio weighted in stocks (which is all these apps support at the present), because investors don't get as much return on cash. Stacking your portfolio in one type of investment is generally understood to be an unwise decision.


Trading Apps could be said to be simply exposing "margin lending" to average people. So if you use margin lending and the share price bombs, you owe that money plus interest. So, In the wise words of Benjamin Franklin "He who goes borrowing, goes sorrowing". Many also boast of that they are "Reducing the fees on trading" and thus " making trading more economical". The truth, however, isn't clear. We've never seen such a change in how stocks are traded since the 18th Century Coffee House traders or the digitalising of the trading floor. 



The shift from central brokers to everyday people buying in and out of the stock market several times a day or even hour, could make markets behave more irrationally. Rather than a stock responding to normal market forces such as the announcement of a new CEO to the companies board, the stock could plummet as millions of average people sell their stock because an app told them too.  


As a money generating option, don't expect to make money off of trading. In fact, be prepared to lose a significant proportion of the money you're trading. Professional traders can't consistently beat the market, so certainly don't think you'll be able to just because of a glossy app. There's luck involved and ample amounts of research in the companies you're investing in. Who are they? What do they do? Are they the under investigation for anything? Has the CEO been bankrupt before? What you don't know is dangerous in this world.



Now that we've gotten all that out of the way, trading apps are a unique way to get your feet wet in trading. Putting up a small initial fund and allowing yourself to buy whatever you want, based on which companies you believe are undervalued.  You'd be surprised how the markets can affect your emotions even though you're gaining and losing the equivalent of only a cup of coffee. Use them as a tool to teach yourself the emotion roller coaster that is trading, in the hopes that you won't be reckless in the future.



















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