Contract for differences (CFD) trading has become increasingly popular for individuals wishing to participate in the financial markets. With worldwide popularity came increased competition, which quickly led to CFD brokers looking for cutting-edge solutions that could win over larger audiences. This article explores the trends either already emerging in the market or having a high probability of being adopted by industry players in the near future.
Integrated trading ecosystems
It is becoming evident that MetaTrader platforms, which have played a major role in CFD trading for a long time, are seeing an increase in competitors as major CFD brokers develop their own platform solutions. The events of September 2022, when MetaTrader platforms were banned from Apple’s app store, showed how dangerous it might be for brokers to rely on an external service provider for their main product. Although the apps were restored in the app store after a six-month ban, the concerns stayed, pushing many brokers to develop their own platforms for trading.
The task provided ample opportunities for innovation and rethinking of how trading platforms should work and what they should include. As a result, an industry-wide trend of integrated trading ecosystems has been developing. Such systems include everything a trader needs seamlessly incorporated into one platform.
One example of such a system is OctaTrader, developed by the international CFD broker OctaFX. This platform aims to integrate everything a trader needs in one seamless space where expert analytics, deposits and withdrawals, and profile management options, are all at hand. OctaTrader allows users to trade without any extra logins or app switches, helping them save time, which is especially important in the fast-paced financial markets.
The OctaTrader platform is available for mobile users using iOS and Android devices, as well as for web traders. Some of the extensive web trading functionality includes charts, the most popular indicators, technical analysis tools, multiple timeframes, and much more. The platform also has a multilingual user interface.
Launching its own trading platform was a major step forward for OctaFX as it allowed the firm to provide its clients with a single, comprehensive, and consistent trading system, which makes trading quicker and more efficient. To further enhance the trading experience, OctaFX is developing a unique hub with every kind of expert analytical information, which will be available for clients within the trading platform.
Artificial intelligence
Recent developments in artificial intelligence (AI) can potentially change the CFD trading industry. AI algorithms can analyse vast amounts of data and identify patterns and trends that may not be apparent to human traders. They can therefore be used to develop strategies and optimise portfolio management.
Traders can significantly improve their performance with forecasts powered by machine learning algorithms that adapt to changing market conditions while incorporating historical data. AI can assist traders in managing risk, which is a crucial aspect of trading. By analysing market volatility, AI algorithms can help traders set ‘stop loss’ orders and adjust position sizes based on predefined risk parameters. Additionally, AI can monitor the market in real time and alert traders to potential risks or anomalies that may impact their positions.
Launching its own trading platform was a major step forward for OctaFX
Another way traders can use AI is automated trade execution based on predefined rules and parameters. By removing human emotions and biases from the trading process, AI can enhance trade efficiency and improve overall trading performance. Considering the above, an AI assistant or advisor can become integral to any trading ecosystem.
Blockchain technology
Initially popularised by cryptocurrencies such as Bitcoin and Ethereum, blockchain technology has gained significant attention due to its potential to transform traditional processes and even whole industries. One of the key advantages of blockchain technology in CFD trading is enhanced transparency. Blockchain provides a decentralised and immutable ledger that records all transactions and interactions between the broker and the trader involved in the trading process. This transparency allows traders to verify the authenticity and accuracy of trade data, ensuring fair trading conditions and enhancing trust between the parties.
Blockchain technology offers several security features that can mitigate some of the risks associated with CFD trading. The decentralised nature of blockchain makes it highly resistant to hacking and fraud attempts. Each transaction on the blockchain is cryptographically secured and linked to previous transactions, making it virtually impossible to alter or manipulate trade data. This ensures that traders’ funds and personal information are protected from unauthorised access.
The transparency of the blockchain can offer some comprehensive opportunities for auditing in CFD trading. Since every transaction is recorded and stored on the blockchain, auditors and regulators can easily access this information and use it to monitor and investigate any cases they find suspicious. Additionally, blockchain-powered smart contracts can automate compliance processes, such as Know Your Customer (KYC) and Anti-Money Laundering (AML) checks, making it easier for traders to adhere to regulatory obligations.
Potential challenges
The above trends, which have already gained some traction among CFD brokers and traders, have the potential to revolutionise the industry. These technologies can enhance trading efficiency, increase market accessibility, and enhance security and transparency. However, it is important to note that while trading ecosystems are already being widely implemented, the practical application of AI and blockchain technologies is still in its early stages, and there are regulatory and technical challenges that need to be addressed.
AI can assist traders in managing risk, which is a crucial aspect of trading
In the case of AI technologies, which rely heavily on machine learning, CFD brokers might need a lot of time to let those systems learn from experience and improve their performance. To enhance fraud prediction, integrate chatbots for customer support, or make accurate market forecasts, AI systems need to be trained on very high-quality data. Additionally, such projects often require the involvement of professional developers and supplementary technical capacities, which can be costly.
As for blockchain, even the initial cost of such a complicated system is very high. The software and hardware needed to implement blockchain, as well as the costs of its maintenance, may outweigh its benefits, especially for small- or medium-sized brokers.
Another major challenge of blockchain-powered systems is how hard it is to modify the data involved in a completed transaction. Entering data into the blockchain might also take more time when compared with traditional methods, which is often crucial for online brokers that process thousands of transactions every day.
Both AI and blockchain technologies also face scalability issues. An AI system will most likely need high-capacity computing resources to process the increased transaction and data volumes during peak market hours. Similarly, blockchain has several scalability issues, including low performance efficiency, limited storage capabilities, and functional extension difficulties.
Another potential challenge is regulatory compliance, as introducing AI and blockchain solutions may not adhere to all the regulatory guidelines requiring the disclosure or additional protection of customer data, such as the General Data Protection Regulation (GDPR) in the European Union.
Overall, while AI and blockchain technologies offer CFD brokers numerous potential advantages and use-cases, addressing these challenges is crucial for their successful implementation.
