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The Neglected Bunch: What the Most Active, Successful Traders Look for in a Trading Platform

The Neglected Bunch: What the Most Active, Successful Traders Look for in a Trading Platform - By Dan Raju, CEO of Tradier


Article on NASDAQ by Dan Raju, CEO of Tradier

  The last five years have seen a massive disruption in how brokerage services are being delivered and consumed. We have seen the entry of 10 million new aspiring investors who want to try, invest and gain stock market access. Commission-free apps for new retail participants have been a central focus of the brokerage industry over the last 24 months. While these platform’s monetization models have been a focus of the conversation, what is abundantly clear is the success of the brokerage firms in attracting these new retail investors with their free apps and free stock incentives. The users of these apps trade an average of 0-3 times a month and carry less than $1000 of cash and positional value in their accounts.

 
 In all the focus on new retail investors, the industry has overlooked the “Active Retail Trader” who trades an average of 10 plus times a month. Unfortunately, this segment gets no attention or focus more recently. This segment is responsible for 80% of the volume and 75% of the revenue that this industry generates. These active traders look for a different set of features and have different sensitivities than the first-time investor. I recently spoke to some of the CEOs of client firms who offer active trading platforms, and I found some remarkably interesting things that we all might need to pause and take notice of.

Prefer Better Execution Over Commission: While this segment is happy to get commission-free trading, they want good fills and best execution. When your trade is valued at thousands of dollars, a few dollars of savings on commissions is not a top priority. They want transparent best execution. Subscription-based pricing seems to be the right balance and extremely popular among active traders. This model gives the active trader, quality execution and caps their commission spend. We see active traders choosing subscription-based services in droves.

Better Real-Time Data: For Active Traders, data is vital. These traders are active all day looking and acting on prices. They need real-time data at their fingertips. They need all their tools to be powered by real-time data. Delayed data will just not cut it for them. They are looking for advanced Level 1 and Level 2 streams of real-time market data rather than fundamental prices.

This Active Trader Group Has Become Options Centric: Most of the active trader segment executes options and in most cases its more than 50% of their volume. The volatile markets of 2020 along with the remote worker environment due to the pandemic has contributed to active trading and specifically active options trading in a big way. They are constantly looking to connect, collaborate and get better at their options trading skills.

Best Tools: They are tool hungry and are looking for an edge. Advanced Charts are in great demand. Risk Analysis tools are also extremely popular. They are looking for risk analysis tools for options, spreads, strategies, and overall positions. They crave trade simulation and back testing. They want to have a good grip on both implied and historical volatility and will crave to price options across different expirations. Support for Advanced Orders is also high. Being able to trigger and schedule future orders intuitively and manage their exits is in great demand. This massive interest from traders has led to the growth and launch of hundreds of such comprehensive platforms.

Education and Mentorship: Active Traders love education and ongoing mentorship This education typically fuels their trading fire. They are constantly on the lookout for great content, virtual trading rooms and educational courses. What we found is that the majority of active traders either subscribe to an educator, content provider or attend or engage with a trading room or a community of some sort. Many educators are offering their own trading platforms and becoming one-stop-shops for Education, Community and Education.

 

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