Social trading - Not every investor needs to be a trader

Social trading allows access of others’ information, Photo: Freepik.com

Online trading has long been a popular field of investment but is too often associated with luck and good fortune, with someone either making bank or losing it all. A closer look has always been disillusioning: besides the fabled “guts” and instinct, there are hours of poring over charts and spotting trends. Trading requires focus, study, and commitment – and the market has never been accommodating to those looking to just dip a toe in the water.

This has been a major barrier to casual investors and others with ready money to invest, directing them to wealth managers.

However, in an age of disruptions and enhanced technological capabilities, stock trading is no longer for stone-cold professionals and the affluent. Traders now have far wider access to information and far better tools to make the most of it and the appearance of social trading has been flagged by experts at the World Economic Forum as early as in 2015 as a low-cost, sophisticated alternative to traditional wealth managers that can draw on a broader customer base and provide more control in their wealth management.

In its most general outlines, social trading allows traders to access others’ information and copy their choices on a financial scale of their own choosing. Most social trading platforms offer a variety of metrics to evaluate investors, including all-time profitability, risk propensity, and even number of followers.

This not only allows traders to pick an investor who best fits their preference but systems allow multiple separate accounts on a platform and duplicate the trading patterns of multiple investors, diversifying the risks and adding more dimension.

The principle allows untrained but enthusiastic traders to copy in real-time the decisions made by those with more market knowledge and expertise. The underlying idea – as put by computer scientist Yaniv Altshuler from the Massachusetts Institute of Technology – is that the users are not playing against each other but rather against the market. This means that trading is not a zero-sum game where somebody has to lose for another to win: a trade will remain equally successful if it is duplicated by a hundred other traders.

Exness, an international broker with worldwide reputation, offers one of the market’s most popular and trustworthy social trading programmes which can be used on an investor’s smartphone through a user-friendly and intuitive app.

The Exness social trading programme allows investors to copy the trades of experienced traders, investing in successful strategies from all around the world. Those providing the strategies to be copied are called strategy providers, and all an investor needs to do is choose a strategy, invest funds, and earn whenever a profitable trade is made.

It is up to each investor what kind of strategy they opt for, not only depending on previous performance but also depending on their personal risk profile and financial capabilities or ambitions. Any amount of funds can be invested and an investor can opt to copy more than one strategies.

Through its social trading programme, Exness guarantees total security and control of personal funds, as only the investor has access to their account, with no middlemen involved. Furthermore, investors can analyse the performance of strategies before they invest in them, ensuring transparency, and can rest assured that all strategy providers are verified clients of Exness.

Online trading has long been an intriguing channel of investment, and while the barriers are not high anymore in terms of capital, they are in terms of knowledge and skills. With the learning curve somewhat smoothed by the abundance of information and discussion readily available at novice traders’ fingertips, the market is now less daunting for new entries.

The fact remains, however, that not everyone has the time or the interest in learning to trade the financial markets and this is where social trading comes in, opening up opportunities for people to try their hand at an exciting investment channel, in more controlled and informed conditions.

Social trading, however, is no guarantee for work-free success – it would be asking too much to outsource all the work and wait for the money to start pouring in. Investors need to show the level of dedication and patience associated with real investment and trading by keeping an eye on their investments.

An investor should be involved enough to see if the mirroring account is producing the yield expected or if the strategy provider is about to take risks that are too much for them – in a sense, an investor needs to be present to pull the emergency break.

While social trading makes the financial markets more accessible and is shaping up as a true challenge to expensive wealth managers, it takes nothing away from what makes trading an art: skill, dedication, determination, and the tenacity to stick to a position even when the world seems to be falling down, just to snap out of a dive and soar higher than ever – all is still within.