05/01/2023
Social Trading is here to stay, brokers and traders need to embrace its’ presence in 2023
The rise of social trading and its’ growing popularity amongst retail investors in the modern era is a real opportunity for brokers to help grow and sustain their businesses.
During the COVID times in 2019-2021, traditional social trading blew up on forums such as Reddit’s Wallstreetbet. Traders voiced their their opinions of “meme” stocks and gathered together to pump or dump a stock. Surprisingly, the force behind millions of individual traders worked and we saw certain stocks such as Gamestop and AMC raise and fall to record levels. The experience was exhilarating for many, because Gen Y/Z realized they could move markets just like large financial conglomerates could when united. Although this “meme-stock” frenzy has subsided, it proved that that individual investors are finding a voice amongst themselves within social communities, and have the ability to collectively share their thoughts and ideas among others, but require a more fitting platform for them to express such ideas transparently and with credibility.
Now let’s move to the other end of the spectrum and look at the big guys(financial companies) and why THEY matter in this equation. Who are the big guys in actual social trading, or just investing in general. They are the social trading platform, brokers, and money managers. Since the dawn of time, conflicts of interests between individual investors and these so called big guys have been at play.
1.Most social trading platforms cannot accurately display a signal’s history
2.Brokers are often market-makers who are trading against you(not always true)
3.Money managers charge high fees and offer minimal transparency on the actual trading conducted.