The following is a paid post:
The advent of copy trading is now allowing a new class of people — in many cases ordinary citizens — to make money investing. And in many cases, the money these traders are making is not only from their own investments, but from the investments of others.
On Facebook or Twitter, the more friends and followers you have, the further your messages go and the more influence they have. On copy trading platforms, the more followers you have who mimic your investment moves, the more money you get.
Copy trading platforms are social networks, where you can view the investment profiles of other members, seeing how much money they have made and lost, and which purchases, sales and trades they have made in the world of stocks, forex and other financial instruments.
You can then allocate a portion of your portfolio to automatically mimic the actions of traders you like; or you can simply follow other members and decide on an individual basis if you want to copy a certain move.
This ability to copy others has a large appeal and is driving the growing popularity of such platforms.
“Trading can be hard,” Anastasios Frangos of platform ZuluTrade told The Telegraph. “But with social trading there’s no need to study the markets. It’s ideal for people who don’t know how to trade – they can simply copy more experienced traders.”
And those traders that people follow receive commissions, which can reach thousands of dollars each month. One Dutch woman, Noa Strijbos, has more than 5,000 people who copy her every move on platform eToro copy trader platform, and more than 25,000 others who follow her, and sometimes imitate her trades.
She is an example of someone who has built a living and a career on copy trading.
“Every bit of trading I do is online,”Strijbos, who pocketed nearly 600 percent profits last year, told Reuters. “The Internet has helped me in transforming myself into becoming a professional trader from an amateur observer in a few years.”
Even though eToro and ZuluTrade have millions of users, copy trading is still used only by a tiny portion of the population.
But these platforms are betting on the growth of the model. Even established Wall Street firms are realizing the power of big data and social networks and are experimenting with using these to make investment decisions.
CIao DL,
I looked at EToro and found it very interesting, but I didn’t have a lot of time to dig into it and left it there idle…
Sharing economy is the “next thing”, so it makes sense that there are people who can actually profit from their stock dealings and stuff like that. I am not a fan of opening trading accounts all over the place (etoro and zulu are young brokers, questions of company safety do arise), investing is now made VERY EASY, but it’s still a very risky business, copying someone else is a bit like letting someone else drive your car. Generally speaking I am against passing responsibility to other subjects when discussing investments, maybe I am totally wrong but I’d like to be the one pulling the trigger when making a decision.
I am in favour of group deals on the other side, if a community (such as the DGIers) would be strong enough to pull itself together it would be really nice to go to an international broker (such as Interactive for example) and ask for “group conditions”.
Ciao ciao
Stal
Stalflare recently posted…May 2016 Update
Hi Stalflare,
Like you, I am also not a fan of opening up new accounts all over the place. These days it seems like every few months a new “broker” or trading platform appears and while many of their business models seem interesting for how they make their money, they still do not have the longevity of many other established traditional brokers. Though longevity is not a criteria for success either. Look at Lehman Brothers and Bear Stearns for example. The whole idea of copying successful traders is not new. For many years people have been copying any trade Warren Buffett made in the hopes of mimicking his results. I guess having this blog and being part of the DGI community we bounce trading ideas off one another and often buy common stocks at the same time. In a broad sense, our online community is similar to eToro. Thank you for sharing your thoughts.
“No need to study the markets.” This doesn’t sound like good advice. I read tons of blogs and follow social trading circles, but blindly following strategies without investigating myself, sounds like a recipe for failure to me.
Investment Hunting recently posted…Target Buy – Automatic Investing Update
I agree and this was almost word for word what I was going to say after reading this!
Bert
Dividend Diplomats recently posted…Banking Without Branches
Hi DD,
Sometimes people don’t want to put the work in to do their own research. I think there is always a time to study the market and individual stocks especially if you are going to risk your own hard earned cash. Thank you for commenting.
Hi IH,
I agree but many feel that simply copying successful trades is enough “market research.” You have to wonder about how many people reading our blogs follow our trades or try and mimic our portfolios exactly. There was a definite herd mentality among our DGI blogs as oil prices dropped and it seemed everyone bought into the sector big time only to continue buying all the way down. As always, I appreciate your comment.
Hi DH
I’m actually in the middle of my own ‘copy trading experiment’, with eToro.
One thing that it isn’t?
It’s not investing!
Hi weenie,
I’m curious to know your real world experience with eToro. I hope you plan to write a blog post giving us the inside scoop as to how it really works or doesn’t. I’m curious to know why you even considered giving it a try as well. Thank you for sharing.