Whether companies like it or not, SOCIAL is a huge part of business in this day and age. Regardless of whether any executive thinks Facebook or Twitter is a “dumb idea,” the fact of the matter is that the way we communicate with each other constantly changes. With Web 1.0, email was the big innovation, but now, Web 2.0 had les to an interactive internet. Therefore, in 2012, the question is no longer whether “you will have a social presence?”, but “what are you doing with social?” As wine seller and Web 2.0 expert, Gary Vaynerchuck likes to say, “Why do I love Social Media? Because it sells s##t!!”
Applying that idea to forex, social trading has become one of the new growth engines for converting new and retaining old clients. Very simply, what social trading does is allow customers to connect with other traders and follow their trades. Followers can see bios, descriptions of strategies, and most importantly historical returns and make their decisions of who to copy. On a business level, the social element works for two reasons. First, new traders who don’t want to trade for themselves can be involved with the forex market by copying others. Secondly, by establishing connections with traders and learning more about them, there is a trust factor that can develop between customers.
When it comes to social trading, eToro is the undisputed leader and the company that basically everyone is trying to imitate. However, although they have a large lead on their competition, there has been a rush among copycat companies to create their own social trading platforms. The new offerings are split between broker neutral and proprietary platforms. With a broker neutral offering, clients from different brokers use the social platform. This leads to cross broker followings. On the other hand, with proprietary systems, only customers of that broker can participate as “gurus” or followers. For a large broker with tens of thousands of active traders, finding traders to follow on a proprietary system isn’t a problem. However, for smaller brokers, connecting with a broker neutral platform is important, as it allows clients a greater selection of traders to follow.
In our 2nd quarter report, Forex Magnates spoke to a number of brokers and social trading providers to learn more about their products. In this post we hear from eToro’s CO-CEO Yoni Assia about the CopyTrader platform. Also, we will take a look at Oanda’s new proprietary platform fxUnity, and Tradeo, a broker neutral social trader.
In response to why eToro launched the copy trade concept, Assia explains “eToro’s vision is to bring online trading and investing to the masses, and it is our mission to continuously innovate and disrupt the financial industry. Our eToro OpenBook and WebTrader are designed to improved and simplify the online trading experience for users of all levels and walks of life. Although many of our users are knowledgeable when it comes to trading, we wanted to create a product that would help investors on the eToro social investment network achieve maximum profit results. Copy trader is based on tapping into the wisdom of the crowds to harness the perceived performance of the best traders in the network. CopyTrader flattens the markets for every person in the network and users benefit from the experience of Gurus and top traders.”
Like eToro’s CopyTrader, which connects traders within the broker’s network of traders, Oanda applied a similar approach in creating their proprietary fxUnity social trading platform. With their massive client base, they were able to successfully launch fxUnity earlier this year. In an interview with Alex Case, Product Manager at fxUnity, he focused on the simplicity of the platform and its expected appeal to new users. Case added that beyond just incorporating the social and copy elements to the fxUnity platform, they also added features that help new traders understand and learn about the markets. Case explained “we’re more than just a social networking platform. We want to provide intuitive tools for those beginners out there, not just a way of copying the mavens. We have developed unique instruments and features that are designed to provide a more intuitive way to learn about and act on currency movements. On fxUnity, users can trade currencies and while simultaneously weighing the market sentiment and connect and follow other traders.”
On the other side of the spectrum is Tradeo. The social platform launched earlier this year and did an update this August to improve the features of its CloudTrader. As mentioned above, Tradeo is built on the broker neutral model and the platform can be connected to, by any customer currently using MT4. This allows for traders from different brokers to connect. In answering how Tradeo adds value to first time traders as well as more experienced traders, CEO Jonathan Adest explains “When you’re new to the market, you need help, information and guidance. Up until now, trading has been lonely; users sifting through lots of information trying to make smart decisions. Tradeo isn’t here to replace trading platforms or brokers. We’re a Social layer on top of the existing market model offering users a lot of information that didn’t exist before”.
In an update to the Q2 report, we connected with Adest about Tradeo’s latest addition, Social Market Charts. The product shows users in a simple visual way the momentum building up in the market, and what are their friends trading. About the new feature, Adest added “seeing what others are doing isn’t enough, users have come to expect engagement between each other, so we offer chats, groups and messages as well. Being Broker independent allows us to offer features users are after, not brokers. In the long run – this is our main strategy; building an expectational experience and network for traders. This approach, combined with a free offering for all traders across different platform is gaining a lot of traction. We’re seeing an exponential growth in our user base in the past few weeks, with many new users who are asking us to recommend them brokers who share our vision of the Forex market”.
This post contained segments of articles written about Social Trading in Forex Magnates Q2 Industry Report
Sites like myFxBook and similar can easily be gamed by ‘gurus’ – in various ways. I think the whole concept is inherently flawed (not only because trading is antisocial in nature) – but that never stopped anything from being a success in finance, let alone retail-trading.
Just look at all the stuff collective2 pulled off. The whole firm is a conflict of interest, if there ever was one. In my opinion your piece does a good job of decribing the status quo from an industry-POV, but falls short in shedding some light on the less rosy aspects of social trading.