The Growth of Social Trading and Its Influence on Forex Brokerage Models
Forex trading is a dynamic business and one aspect of it that has emerged is social trading. It is worth pointing out that while many of these ideas might have started as marginal theories, they are now convenient to the way traders engage with markets and how some brokers manage their companies. There isn’t any doubt that social trading is a trend that is here to stay. Some define it as a new way of thinking about trading, placing cooperation and common knowledge at its core.
It is a unique form of investing, where people can watch other people trade, emulate them and even follow in real time. For many this approach eliminates a high entry barrier that normally comes with forex trading. It saves time as you don’t need to take several years to master technical and fundamental analysis like you would do as a beginner to become an expert and achieve similar results as these experts who novice traders can align themselves with. This democratization of trading knowledge has made the opportunity available to a different clientele that would have otherwise been discouraged by the complexities inherent with forex trading.
Image Source: Pixabay
This shift in trend has been well noted by the forex brokers primarily due to the following attributes of social trading. Some are launching social trading components into their platforms, thereby providing special sections for communication, analysis, and idea exchange. While some brokers rely on relationships with third-party social trading networks, others build custom interfaces, to meet such demand. The end product is a change to the established brokerage model. What people used to know as platforms are no longer simply about the execution of trades. They are now active places where traders can meet to learn and develop jointly active thriving communities.
Social trading is also changing the concept of a forex broker as well as the way that traders manage their investments. Brokers are turning into knowledge procurers that instantly provide valuable additional services like leaderboards, performance metrics, and open monitoring of the best and most fitting traders. These changes make it simpler for users to find the right people that they should be subscribing to. Study on the other hand, points out that brokers must be very particular with the information they provide as these has to be correct and more importantly, reliable. This must be supported by sound systems that can audit trade outcomes and check for fraud to guarantee that followers of the strategies are candid with their trades.
The other equally significant factor of this phenomenon is the issue of regulation. More and more people are engaging in social trading, bringing into focus how leading brokers are handling it. Issues of transparency, fairness and of risks and their disclosure are emerging as more important. Social trading is already popular due to its innovative nature, but brokers must balance innovation with the need to protect traders from additional risks. This often means that applications will have to be written with clear advisories about the risks of copying trades and ways to properly control exposure to them.
It also promotes community which has so long been lacking in the forex market. It has transformed trading to be a better and new experience where folks can rejoice in victories, embrace defeat, and encourage each other. This sense of belonging is now turning out to be a good incentive, helping traders stay active for longer durations as compared to conventional trading and the traders do not feel lonely as they usually tend to do while trading.
The very nature of social trading proves that modern traders focus on different aims rather than just getting profit. Through the adoption of this new trend, a forex broker is not only satisfying the current market demands but also creating the right platform for future development of the entire forex market.
Comments