19.02.2018

Social trading – become a stock market trader using social media

Observing the investment strategies of other users, commenting or even emulating them – social trading websites, such as wikifolio, make all this possible. Apply the functions of social media to the world of finance.

The days when trading shares was inconceivable without the help of a bank advisor or broker are over. Social trading websites , such as wikifolio, ayondo or eToro, bring investors and traders together and are blurring the lines between the stock market and social networks. These networks work in a very straightforward way: asset managers but also ambitious private securities traders publish their views on securities or even their entire portfolio on a website. In turn, investors can view this information, comment or even emulate the approach. Investors do this via copy trading, where they decide on the amount of money they wish to use to follow a particular trader. Once they have decided, this trader’s purchase and sale transactions are automatically replicated. In contrast to traditional trading, there is complete transparency. Investment decisions are immediately published and there is the opportunity to openly discuss them.

Platform for exchanging trading ideas

However, the opportunities of social trading go even further – wikifolio, for example, allows private traders, asset managers and the financial media to create sample custody accounts to reflect various trading ideas. If these certificates obtain a sufficient number of followers, they are issued in conjunction with the financial services provider Lang & Schwarz. A virtual wikifolio therefore becomes a certificate which can actually be invested in on the stock exchange. If the certificate turns out to be successful and performs well, all three parties benefit: firstly, the trader, who receives a percentage, secondly, the investor who gains from the increase in the value of the capital deployed and, thirdly, wikifolio, which levies fees. In  this model too  the benefits lie in the transparency: all transactions and charges are public from the outset and performance is completely traceable. The price trend provides an indication of the effective success of the trader’s investment strategy.

Prior knowledge required

However user-friendly these social trading networks may seem, they can only be recommended to financial market novices to a certain degree. To understand the strategies in the first place, a basic knowledge and a certain level of experience in trading financial products is required. That said, social trading still opens up exciting new opportunities for both interested private investors and asset managers.

This might interest you too