The Emergence of the Social Trader
A lot of the previous blog posts have dealt with investing and how technology and the internet have made things easier for the common woman and man. So it’s no surprise to introduce another concept: The Social Trader.
Social trading is a practice online investors employ to make financial decisions, in which they utilize user-generated financial content from sites such as Profit.ly and Etoro.com. Sites like these help the social trader to analyze financial data by supplying a common ground for copying and comparing trades, strategies, and techniques. Before social trading was possible, copy traders and investors had to rely solely on technical analysis to make investment decisions. Today’s social trading investors are able to trade data-feeds of social indicators online with other traders.
Social or copy trading allows online trading with the assistance of others. Many social traders claim that this ability greatly shortens the time necessary to move from being a novice to becoming an experienced Forex (Foreign Exchange Market) trader. All foreign currencies are traded in this over-the-counter market, which is the most liquid and biggest world market today. Social traders can watch others take trades, interact with other traders, and then copy, or duplicate, the most successful trades, and in the process learn why top performers choose the trades they do. By using copy trades, a new trader can learn what strategies work or what strategies don’t work.
What are some of the key features of social trading?
Transparency – By using trading platforms like InvestFeed or eToro, a social trader can find out the performance statistics of other traders, past and present positions, plus current market sentiment, which allows members all the information they need in order to appraise the site contributor’s credibility
Monetization -The ability to convert an object or asset into legal tender or money. It is possible for copy traders to learn a great variety of data about other users which will benefit them in the long run.
Cooperative trading – Through these online sites newer traders have the chance to work cooperatively in trading teams, pool funds, share information, and divide research up collaboratively.
Information flow – Social traders can benefit greatly by studying information exchanges that flow freely between financial investors. Freely exchanged information is valuable to individual investors.
How does copy trading compare to social trading?
Copy trading capabilities are available with assorted financial trading operators as one part of a bigger social trading platform. Copy trading permits financial market traders to automatically copy any positions that are managed or opened by a particular investor inside the social trading network. A portion of the funds of a copy trader is linked to a copied investor’s account. This means that all trades initiated by the investor being copied, like opening or closing positions, or assigning Take Profit and Stop Loss orders, will then be executed in the account of the copying trader, depending upon the allotted trading funds of the copier and the proportion of the investor’s account that is being copied. Copy traders usually have the right to disconnect from any copied trades and begin to manage these trades themselves.
A study of copy trades in 2012 demonstrated that traders who did copy trades on eToro with a “suggested investor” were 6 to 10% more successful than manual traders, and four percent more successful than copy traders of random investors. Research is on-going to fine tune a trader’s capacity to benefit sustainably from copy trading.
Social trading has become increasingly popular. Here is a listing of the most popular social trading networks available today:
- eToro – This site is a social trading network as well as a broker and focuses on novice investors. New investors like this site’s simple mobile friendly interface A review of eToro can be found toward the end of this article
- ZuluTrade – This site currently has the greatest number of investors and traders online. They provide complete trade copying plus social interaction capabilities
- Ayondo – This German based site was the first to offer auto trading to UK customers in order to “spreadbet” Forex accounts. They offer stocks, indices, fx, bonds, interest rates, and commodities
- Copyop – This is the most advanced and leading trading network for social binary options
- CM Trading CopyKat – On this site you can copy and follow traders through a special “CopyKat” SIRIX trading platform. Members can mirror trades from everybody on SIRIX
- Profit.ly – This huge website deals specifically with instructing people on penny trading ins and outs. This site offers email stock-pick alerts, SMS, plus a private chat-room where users can find help. A review of this copy trading site can be found immediately below.
Because they’ve become slightly more popular compared to the rest, we shall examine Profit.ly and eToro further:
Social Trading With Profit.ly
Profit.ly was created to introduce accountability, data-driven optimization, transparency and measurement into the world of online trading. Copy trades exist in abundance. However, concerns about stock manipulation as well as industry regulations sometimes prevent affiliates and members from being able to share information openly all the time. For this reason Profit.ly allows investors and traders to make private profiles where they can enjoy total account privacy.
Check the interview below:
This online site has advanced analytic tools which allow social traders to measure their performance, and at the same time make a knowledgeable analysis of which trade setups work the best for them. Traders can choose from various different products that include the capability to track profits, verify trades, get on leaderboards, message and follow other traders, plus view the stats of other traders for $29.95 a month. $49.95 a month allows a copy trader to make a private profile (but you won’t have access to other traders’ stats). The Pro level costs $74.95 a month and includes a private profile, as well as access to the statistics of other traders.
Profit.ly founder Timothy Sykes has made a career of exposing misinformation and fraud in the online guru and penny stock industries. A new feature of Profit.ly is called the “Bernie Madoff“, which allows community members to weed out and expose those traders that are possible liars.
Social Trading With eToro
Founded by Jonathan Assia, eToro.com, “the Facebook of trading”, is currently the leading social trade network in the world (excluding the US). More than 5 million investors are using this social investment network. Opening an account with eToro gives you immediate access to CopyTrader, which advertises that members can choose to copy from more than 3 million traders. Once you open an account you can utilize their OpenBook platform for searching top social investors. When a potential trader to be copied is spotted, a user can allocate a part of their funds and begin copy trading. Any information that the copy trader submits is immediately protected by state-of-the-art encryption technology to ensure that your information won’t be shared with any third parties. A new account can be funded with PayPal, Moneygram, or credit card.
One interesting feature of eToro is that if “popular traders” are copied, they’ll be rewarded. Depending on how many copiers a Popular Trader has, they’ll receive monthly fixed commission payments. The topmost “Elite” traders will receive annually 2% of all funds that are under their management, as well as totally commission free trading. In July of 2016 eToro updated their “Popular Investor Dashboard” to include a CRM (Customer Relationship Management System) which enables more interactions between copiers and Popular Investors. There’s currently more than 5 million users on eToro, which appeals to professional traders that are interested in making some extra cash for their trading skills.
To discover more details on the popular Social Trading platform, consider reading the full blog post review on eToro.