Social networks have become indispensable for the consumer market, Facebook, Twitter or LinkedIn attracting tens or hundreds of millions of members.
This mature technology is also being adopted in the capital market, especially in the retail sector.
While Social Trading can be defined as this method of adopting investment decisions based on social indicators (information from other investors, market trends and expectations), social trading networks turn them into available online information.
The first networks were focused only on the exchange of information between investors, a concept similar to what Facebook or mySpace offers.
Create a profile and post your preferred strategies, your favorite financial markets and also, your experiences.
The next logical step for these networks was to allow investors to automatically copy transactions of those they consider to be profitable.
Participants – traders, speculators or investors, connect their existing trading account to their affiliate broker to follow successful investors, or to attract followers.
There is no direct contact between parties or a capital transfer, everything happens online
Admiral Markets estimates that 5-10% of retail investors from the FOREX market are present on these social trading networks: beginners have the chance to get more profit by collaborating with professionals, while professionals earn management fees and even profits or followers.
If initially focused exclusively on trading on the Forex market, many of the networks have added commodities and stock indices to the portfolio.