While the number of active traders has risen up during the pandemic, the competition between brokerage businesses is stronger than ever. This environment made traders realize that they can demand more from the brokers they are currently working with. The cost of transition from one broker to another becomes very smaller compared to the advantages coming with it. This situation gives brokers an incentive to diversify their services and target more customers. Here, which service is demanded most by investors can be a shortcut to the right decision-making for brokers and the answer is obvious: Real-time data.
Why Is It so Important?
According to a pool conducted on Linkedin, 48% of investors stated that real-time is the most significant factor in choosing an investment platform. Real-time data simply means providing the necessary information just after the changes happened with the shortest possible delay. Online brokerages usually provide delayed quotes, which shows how a security is performed 15 or 20 minutes ago. If you do not know that the quotes you observe do not depend on real-time, the consequences of an inaccurate trade may be disastrous.
Experienced traders would know that the stock prices may fall or rise up tremendously just in seconds or minutes. While talking about 15 or 20 minutes, trading with delayed quotes will be more like throwing darts blindfolded. Suppose that you are following a stock when you are holding a long position. You bought 1000 shares of the stock at $1 and you see that the price of the stock provided by your platform comes up to $1.5. That means your profit will be $500 if you sell your shares at that price. With the information you have received, you place a sell order at market price. However, your broker uses delayed quotes and the price is actually $0.5 at the time you place the order, so you will have ended up with a $500 loss.
The disparity between quote and real-time data can also affect your trading strategy. Scalpers aim to find opportunities for small profits between minor fluctuations in order to get a bigger profit in the end. If the data feed you use displays delayed quotes, then you cannot act as a scalper, since you cannot predict any minor price movements by looking at the data of actions that happened 15 minutes ago. On the other hand, positional traders are usually fine with the lack of real-time data. The reason is that their profit comes from the long-term performance of a stock rather than high volatility in a short period of time. In that manner, real-time data allows you to become any type of trader that you want and increase your potential.Share this article