Social Trading - Regular folks want to trade too...
Social trading is not quite what you're used to...
In some way everyone's aware of 'traders'. They're those guys wearing the red braces or carrying oversized phones, driving expensive cars and generally looking rich. What exactly did they do to get all that money?
Nobody really knew... It had something to do with money, phoning people, and shouting "buy!"and "sell!" in a strange building... And weird charts on computer screens. And Ferraris.
Removing the barriers to Entry...
Along came the internet, and with it, social media. Everyone has a profile, everyone knows how to send each other messages, and look at their friend's 'Feed' or 'Wall' or whatever. We see what everyone's thinking and drinking, and eating, and taking photos of. It's designed to be social. Communal.
Trading goes Social
We all got used to these sites so quickly - we know how they work and what to do. And when the time was right - when internet speeds were fast enough, everyone was used to social media, and websites became complex enough, social trading was born. A mixture of social media and classical trading.
Classical Trading for all
Whilst it's social, it's still trading, so there's still a lot to learn and get familiar with. It would be a mistake to think that they've made the actual trading part easy - that's just about as difficult as it always was - the only difference is that now everybody has easy access to it.
"Democratising trading" is a slogan you might have heard, which is true, but it's also a bit of a cover - the 'exchanges' (systems which facilitate trading - in this case the websites) are still very much businesses, and having so many millions of new customers is a genius move on their part. They've opened it up for everyone, and made it all look very familiar.
There are traders' profiles which you can browse through, and you can see people's 'Walls' or 'feeds', and read what they're saying and see what they're trading - get stock tips and check out their statistics. It really is amazing, but actually knowing whether an asset will go up or down in price - that still takes work. What are we all to do?
The next bit of genius was to leverage all that very clever computer power and high speed internet to let the little guy trade like the pros.
You're wondering how?
Well, what if you could browse through lots of different traders' profiles on one of these exchanges, check their statistics, see which ones you think are trading well and making lots of money, and then just set your account to automatically copy them... Wouldn't that be nice?
That's what they've done.
We all got used to "following" someone on social media, so they made it all work the same way in trading. When you find a trader who you think is good at what they're doing, you can simply press the big friendly "Copy" button, set an amount of money you'd like to copy them with, and hey presto, your account now makes all the trades they make, and you can't lose more than you copied them with. It's genius, and it's only possible because of the technology we have now. Even 10 years ago, this would have been impossible...
So it's totally Safe?
No. Of course not - it's still trading. You can still lose money. If you meet someone who can guarantee they'll make you 'X' amount of profit over the coming month, or year, or decade, chances are you need to run as fast as you can. Nobody (apart from maybe Goldman Sachs) has a crystal ball.
Is it Regulated?
Social Trading is now such a huge and lucrative market place, that companies can't exist if they're not regulated (which means they have oversight from national / international financial authorities) - the unregulated ones will soon be dropped by the market place... I'm not a pro, and this isn't financial advice, but it's probably best to steer well-clear of any trading company which isn't regulated by legitimate authorities.
How much does it cost?
You have to credit your account with real money, but you're not charged by the person you're copying. They get incentives from the Exchange (website owners). The more people who copy them, the more they get from the website owners. There ARE fees associated with Social Trading, as there are with all brokerages (so far...) I made a video about all the fees on the social trading site I use, which you can see below.
So What now? I still don't quite get it...
Do I need to learn how to trade?
Nope, you can use the copytrading feature, but learning a bit about trading is going to happen along the way and will help you choose the best traders and not be terrified by all the jargon (which you'll get used to very quickly)
Can I trade manually if I want to? Do I have to use CopyTrading?
Yes, of course you can trade manually if you want to, and no, you don't HAVE to use copytrading - it's just there for the people (like me) who don't want to become trading pros and are happy to let other, more experienced people trade for them.