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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.