There are many online platforms out there that can help you trade stocks, indices, commodities and currencies, but few are based on ‘social trading’ in the way that the eToro platform has managed to develop.
The latest trend in sophisticated investing is not being pioneered by a trail-blazing hedge fund manager or celebrity stockbroker, but rather by a Fintech platform that is revolutionising how people trade, and it is all based on being social.
eToro calls itself the world’s leading online social trading network, and with over 4.5 million users in 140 countries, it would be hard to argue.
It all started in 2007 when CEO and founder Yoni Assia decided to create a trading platform that would set out to revolutionise the way people access the financial markets. He aimed to make people’s trading experience more social, simple, fun and open. It was a novel idea, especially given how many financial centres act like very exclusive professional clubs, with a language and custom all their own.
In response, eToro created a global social platform, regulated in Cyprus and the UK, which takes financial trading and turns in on its head. It’s the very opposite of secret, which might irritate some, but has proven attractive to millions of people.
For the first time, eToro has exploited the idea of community and encouraged its members to not only communicate, but also collectively harness the wisdom, successes and failures of others. In addition, eToro is similar to many other trading platforms in that it allows you to trade stock markets, stocks, indices, currencies and commodities, all via what is known as Contracts for Difference (CFDs). A CFD is basically a contract between an investor and the person who offers prices in whatever you want to trade. So, if you say that a stock will rise, you buy at one price and then if it rises, you sell when you wish, pocketing the profit. Likewise, if the price should fall, then you are out that money. It is charmingly simple (to make and lose money) and the big advantage is that you could trade up as well as down. This means that volatility is your friend and you do not have to fear the falling market.
eToro is different from its rivals in that it exploits the community element. You can make friends on the site, in addition to following key traders and deciding to copy their trades, a formula successfully introduced by the Forex trading platforms (known as trade copying). The big difference is that if your trades are copied when you get a following, you get paid for the privilege.
For a newcomer to the eToro site, one of the attractions is that you are not only presented with the prices of individual stocks, currencies, or whatever strikes your fancy, but you are also presented with how people on the platform are trading. You can see, for example, that 77% are selling the UK100. This gives you some confidence when making a trading decision, as you are doing the same as the ‘crowd.’ When you see that 99% are trading in one direction, then it is very difficult not to follow suit.
Of course, the cynics amongst you might point out that following the herd is not always the best policy when it comes to trading, but it is hard to dispute that it adds a very useful layer of visibility to your trading decisions. For those that are contrarian investors and like to move away from the pack, then it is doubly useful.
Trade copying is also one of the huge advantages. How often have we listened to the trader who always seems to get his timing right and come out on top? How many times are we tempted to ask them to give us a call when they are about to make a trade and give us a heads up? With eToro, you can opt to follow the most successful traders and hang onto their coat tails for as long as they continue to be successful or until they fall by the wayside.
Investing money has never been so easy, which is why, although it is a good idea to have fund managers to watch over most of your portfolio, if you feel inclined to have a go yourself, then trading on a platform such as eToro is about as much fun as you can have with your clothes on. Furthermore, it just might widen your social circle.