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Look for transaction costs to continue to decline. At some point, those with large accounts will see transaction costs reduced to zero, in recognition of their account balances. |
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Look for an increasing amount of information to be delivered at no cost. |
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Look for increased portability represented by truly effective alerts and trading capabilities delivered to your portable or wireless device. |
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Look for an expanding array of trading tools that help you spot and capture good trading opportunities. Isn't that what you're here for? |
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Look for a strong move toward automated tradinga "set it and forget it" capability that will allow you to execute in more trades even while you go about your other daily activities. |
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The second problem for the online brokers is declining transaction volume. Even while their customer base is expanding, trading transactions per customer are declining. Why? Because inexperienced, uneducated, and unprepared traders are not making consistent profits. Because we can no longer count on a runaway bull market to give a profit to everyone with the nerve to "buy and hold on." Because the inexperienced trader has no idea how to profit in a flat market or, even worse, in a (gasp!) bear market. |
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If these traders don't "win," the thrill is gone, so they cut back on their trading. |
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Online brokers know that profitable customers will solve this problem, so they really want their customers to profit in the marketbull or bear. Brokers really want their customers to be trained and educated. |
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Butand this is a huge butthe online brokers cannot train their own customers. Do you remember our comments about suitability above? The regulators have expanded their definition of suitability to include "teaching or encouraging a style of trading." If your online broker provides you with any form of trading education, that broker is encouraging a style of trading, and that broker becomes responsible for the suitability of every trade you make using that style. |
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In the online, real-time world, it is not feasible for your online broker to gauge the suitability of every trade you make. The broker simply cannot take that liability. To avoid that liability, the online broker must make no recommendation to you at all. |
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Beyond the liability, the potential for conflict of interest is staggering. Do you think it is possible that an online broker that makes its money from commissions on the number of trades you make just might train you to make lots of trades? Is that activity really good for you? |
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