Avner Meyrav
By Avner Meyrav

Social Trading: The Future of Online Trading

The Internet revolution has had a tremendous impact on the global trading industry. If in the past, trading, stock exchanges, commodity future contracts, and ETFs were the sole domain of big financial institutions and professional brokers, nowadays, the case is quite different. In today’s world, Contract for Difference (CFD) trading enables almost anyone to become a trader, and the unique social features available on CFD trading platforms give added value to those who wish to invest online on their own.

When trading online as a private user, traders engage in a CFD with the platform, meaning they open a position at a certain buying price, and if the price goes up, they can close it at a profit. If the price goes down they can choose whether they wish to close the position at a loss, or wait and see if the prices go back up. Alternatively, they can open a sell (short) position with the hopes that the prices goes down.

The Rise of Social Trading

Social trading relies on the wisdom of the crowd, and harnesses the collective knowledge of millions of traders. The practice of CopyTrading™ was created by eToro, and enabled users who lack time or experience, to benefit from trading by copying others. Essentially, CopyTrading™ allows users to attach some of their funds to an experienced trader, automatically copying them in real-time. This means that traders could now rely on the wisdom and experience of successful traders, and take less of a “hands-on” approach to trading.

Experience traders have an interest in being copied, as the platform rewards successful traders who have many copiers, alongside the prestige they achieve by positioning themselves as opinion leaders in the market. Since there are no hidden interests by either party, and the platform operates in full transparency, it is a win-win situation for both copier and trader.

Successful traders with many copiers can apply to eToro’s Popular Investor program, and receive amazing perks, such as a 100% spread rebate, monthly payments, and up to 2% of Assets Under Management (AUM). Two good examples of Popular Investors on eToro are @goldoilstocks, who made an overall profit of nearly 23% in 2016, and @4expirate, who has been on eToro since 2013, and has shown constant, steady gains.

The social revolution in online trading is still ongoing, and analysts predict that over the next five years, some 25% of all traders will engage in some sort of social trading. With increased accessibility, intuitive interfaces, and social-based automation features, it is no wonder that the world’s social trader population is in the millions, and growing rapidly.

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