(Reuters) - The
solitary world of online foreign exchange trading is emerging from the
shadows as solo investors turn to specialist social media networks to
link up with their peers and seek market-beating strategies.
Individual or retail
trading, estimated at 8-10 percent of the $2.5 trillion daily spot FX
market, used to conjure an image of a lone trader with little contact
with the outside world.
But that is
changing. Thanks to specially tailored websites known as social trading
networks, users are able to see and even copy the trades of top-ranked
rivals, swap ideas and gauge the market mood in online chat with a
community of contacts.
"In the
world of trading there are a lot of signals but social media gives us
the market sentiment and it is ideal for chatting to people across the
world for trade ideas," said Patrick Orini, who has been trading FX
online since 2004.
Retail
forex traders make their deals using personal accounts through brokers
such as Alpari, FxPro and IronFX. Increasingly, traders are hooking up
their broker accounts with social trading networks, such as eToro,
Currensee and Tradeo.
Traders usually pay a subscription to use the service while the social network and the broker might share revenue on trades.
In
a system reminiscent of microblog network Twitter, top players who make
their trades visible can gather thousands of followers, some of whom
pay to copy their strategies.
Orini's trading account on a social trading network called Tradeo has 500 followers, of whom around 20 copy his trades.
If
online investors do well in their trades, they will attract more
followers and will be ranked higher on the trader "leaderboard" posted
on the site.
Retail FX has grown
over the last decade as brokers allow individual traders to take highly
leveraged positions previously accessible only to institutional
investors. The largest group of market players is based in Japan.
eToro,
one the world's largest social trading platforms has processed more
than 20 million trades since it went live at the beginning of 2012.
Tradeo,
a social network for forex traders based in Tel Aviv, launched three
months ago and, according to its co-founder and CEO Jonathan Adest, the
site has posted up to half a billion dollars of trades from around
10,000 traders since then.
"It's not a broker, but a network for brokers -- a bit like an online trading room," Adest said.
He
said Tradeo also combats a key hazard of online trading -- inaccurate
or bogus information. Traders often swap ideas on comment boards, but
anonymity and low security makes it difficult to weed out spam.
"The
idea of creating a niche social network for forex traders is to help
verify commentators usually found in chat rooms and comment boards,"
Adest said.
In its increased use of social media, online forex trading is catching up with developments in the equities market.
Retail
equities trading is estimated to account for up to half of trade in UK
small companies. Retail FX's smaller share of the overall market
reflects the fact that most trade is over-the-counter and lack of
volatility that make it harder to turn a profit.
TWITTER
In the equities market, analysis of Twitter postings and news headlines has been used to predict stock price movements.
London-based
hedge fund firm Derwent Capital is launching a new spread betting
application for retail traders in January that will use Twitter's 350
million daily tweets to create a sentiment indicator covering currency
pairs and other assets.
Social media makes existing currency market sentiment models more effective, said John Hardy, head of FX strategy at Saxo Bank.
"It would be a new way to measure "sentiment" in real time, something that banks
can do already via how people are actually trading...but the Twitter
measures might be able to bring new nuances and sophistication," he
said.
Arguably, solo traders who hook up to social trading networks are seeking an edge in the "wisdom of crowds".
"The
reason why so many people, like myself, do share their activity and
ideas is to help each other and build the community," Orini said. "I got
so many valuable ideas from other traders, that I'm more than happy to
share my ideas as well."
Article Source: http://www.reuters.com
No comments:
Post a Comment