Copy Traders Become Standard
With the combination of online trading and social media, more people are becoming so-called copy traders.
This increasingly popular approach to investing allows people to connect with other investors online, view the history of their trades, gains, and losses, and then allocate a portion of their portfolios to automatically mimic the actions of those with appealing records.
This is now an increasingly standard tool for online retail forex platforms, according to Leaprate.
Many existing forex brokerages have added functions allowing users to become copy traders. It is a “win-win situation” for both brokers and copy traders, according to Leaprate.
The option, due to its popularity, can work to draw more users and produce more revenue for a trading platform. By becoming copy traders, average people or newbie investors can get exposure to markets without feeling like they are completely on their own because they have the examples of others to follow.
Copy trading is not limited to forex, but can also be used to access stock and other global commodity markets.
The industry has grown so rapidly that last year it began attracting the attention of regulators, and many platforms are now under the jurisdiction of CySec, the regulatory body in Cyprus, which is also part of the European Union.
This follows the determination by the European Union that many of these platforms can fall into the category of portfolio management companies, and need to be registered and regulated as such.
Although some were worried such a step would hamper the industry, it has become even more mainstream following the increased regulation. In fact, some in the social trading industry have said the regulation strengthens it and it a sign of maturity.
Along with the regulation, many platforms, including industry leader eToro, have added features to help users better understand and control the risks they are willing to take.
Such measures range from risk scores displayed on the profiles of all traders, and the copy traders’ ability to preset the amount of money they are willing to lose before halting trading activity. This lends further transparency to individual copy traders and to the social trading industry as a whole.
As technology changes and disrupts the entire financial industry, copy trading is expected to continue to expand, giving everyone a chance at transparent, but guided, access to the markets.