Becoming a Copy Trader: How Social Media changes our financial life
Social media networks have become a standard part of modern life. Americans check Facebook, Twitter and other social media accounts an average of 17 times a day, according to recent research from Informate Mobile Intelligence.
This is largely due to the ease of access to such media via mobile devices, with the average American spending 4.7 hours a day on a smartphone.
But social media is not only changing the way we socialize, campaign for political office and get our news. It is also changing the way we invest our money, especially with the rise of social investing networks, like eToro, ZuluTrade, Ayondo and others, turning them into what is known in the industry as Copy Traders.
These sites are platforms that allow members to invest in financial instruments in the forex and stock market worlds. But most importantly, members can view each other’s investment moves, seeing purchases, sales, gains and losses.
And, perhaps most valuable to those who do not consider themselves investment experts, someone can become a copy trader, meaning they have the ability to copy the moves of other investors with proven track records.
A copy trader can automatically set up a certain portion of funds to imitate the moves of others. Or members can simply follow others and decide on an individual basis if they want to copy a trade.
Unlike traditional equity or forex investments, the minimum amount people need to put up can often be as low as $50. And because such platforms are based on a derivative tool called a contract for difference (or CFD), rather than on purchases of actual stocks or currency, there is more leverage available.
Users can also make money when asset prices drop, if they have hedged in that direction, rather than when they simply go up, as is the case with traditional investments.
The rise of the copy trader is just one facet of the massive changes in the financial sector due to new technology, especially the collision of big data, social networks and mobile devices.
Like other changes, including robo-advisors and online money transfers, copy trading is opening up the world of finance to more ordinary people. In this case, anyone familiar with social networks can become a copy trader, accessing new opportunities in stocks and forex, even without being an expert on financial markets.