Retail Investors Mobile Trading – A Sign Of A Stock Bubble?

Retail Investors Mobile Trading – A Sign Of A Stock Bubble?

As the cost of trading has significantly lowered, making money less sticky to particular stocks, new tools that enable buying and selling on the fly are becoming ever more popular. Could such a development, being actively used by retail investors, be a sign of a market top?

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Retail discount brokers see consistent growth in mobile trading apps

Retail stock investors have used their smartphones for obtaining stock quotes in the past, but are now executing buy and sell orders from their cell phones.  Mobile trading grew over 60% in 2013 at Fidelity Investments, where its financial apps have been downloaded 3.6 million times, according to a report by Sital Patel of MarketWatch.  The firm has close to 15 million customers.

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E*Trade Financial Corporation (NASDAQ:ETFC), with three million customers, says that use of its mobile devices is growing at a clip near 30% a year and in 2014 could account for one in ten customers.  While the broker provides both apps for the tablet and mobile device, the brokerage says it is the cell phone app that gets 80% of the action.  Scottrade’s 2.4 million customers are showing the most percentage growth, as trading on mobile and tablet apps has risen by 713%.

Control from millennial driving the growth

As new generations of investors comfortable with technology drive their own investment decisions, their desire to control their portfolio in real time – quickly getting in and out – is a key consideration.  “Since the crash, they want more control of their accounts, and mobile helps facilitate that,” John Matos, senior vice president of product management for E*Trade, was quoted as saying.

“I might not be watching the market, but if I am in the car and realize the market is up 300 points, I can pull over and just jump on my phone and sell something if I want to,” Sunil Katwala, a Fidelity customer who trades on his phone several times a month, was quoted as saying. While the counter-intuitive strategy of selling on highs is one use for cell phones, such convenience could also lead to selling on lows during a market crash. “if you see a big shift in the market, we see a big spike in trading on the phone,” Velia Carboni, SVP for Fidelity’s mobile apps was quoted as saying.

Heavy trading leads to retail loss

While trading on mobile devices and tablets might increase the ease – and volume – of trading, is this positive for investors?  The report noted that an investor who trades frequently, while enriching the brokerage firm, are typically doing their portfolio a disservice.

Fans of mobile technology say it doesn’t matter which method of trading someone is using – traditional computer, mobile or tablet – trading mistakes happen regardless of environment.  “Chances are if you’re going to screw up, you are going to screw up on a PC also,” says Katwala.

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Mark Melin is an alternative investment practitioner whose specialty is recognizing a trading program’s strategy and mapping it to a market environment and performance driver. He provides analysis of managed futures investment performance and commentary regarding related managed futures market environment. A portfolio and industry consultant, he was an adjunct instructor in managed futures at Northwestern University / Chicago and has written or edited three books, including High Performance Managed Futures (Wiley 2010) and The Chicago Board of Trade’s Handbook of Futures and Options (McGraw-Hill 2008). Mark was director of the managed futures division at Alaron Trading until they were acquired by Peregrine Financial Group in 2009, where he was a registered associated person (National Futures Association NFA ID#: 0348336). Mark has also worked as a Commodity Trading Advisor himself, trading a short volatility options portfolio across the yield curve, and was an independent consultant to various broker dealers and futures exchanges, including OneChicago, the single stock futures exchange, and the Chicago Board of Trade. He is also Editor, Opalesque Futures Intelligence and Editor, Opalesque Futures Strategies. - Contact: Mmelin(at)
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