Retail Currency Trading Boost Thanks to Facebook-like Sites
By Lemuel Cacho
For a long time, ordinary people see retail trading in the foreign exchange market as Voodoo. That is because professional traders keep to themselves and they don't want the rest of the world to know how they do their jobs. This includes keeping others, especially competitors, from knowing their detailed trade history and where in the market they stand. Their self-created limbo from ordinary people keeps them safe in this mystical world of retail currency trading.
However, as archers replaced knights, as catapults were found more effective in crushing high towers to rubble than infantry charging forward, and airplane flights become statistically safer than broomsticks, information-sharing technology, thanks to social network-driven trading sites, is becoming a valuable asset in the online retail currency trading market.
The contributions of social networking-based trading sites are encouraging more people who are non-professional investors to join the very competitive retail currency trading market. According to the Bank for International Settlements, online and mobile trading accounted for up to 10 percent of the US$4 trillion per day foreign exchange market in 2010.
There are online trading sites such as Currensee and Etoro that have been using social networks to attract non-professional traders learn more about the retail currency trading market. Their approach is to allow users to build communities where users can share and discuss trades at the same time ranking top players in the site. This approach allows other users to benchmark and copy the trades of successful users.
If you are a Facebook or Twitter user, the retail currency trading platform of Currensee and Etoro looks exactly like that. Etoro's user profiles around the world, for example, include trading history together with detailed performance breakdowns and follower/following lists.
Etoro's OpenBook platform helps beginning and amateur traders to learn more about the retail currency trading market real time. As a result, amateur and professional traders alike can use the information shared to inform their own trades. They can replicate the positions opened by other traders but still leave the decision to users when to close a position. The profits and losses still depend on the decision of users.
Etoro's OpenBook was launched in late 2010 and also categorizes users by trading style.
Currensee, a US alternative investment service, also encourages amateur traders to copy successful trades especially those of high-performing professional traders whom can be followed in real time. Since its launched in October, Currensee has seen a total turnover of about US$6 billion.
Industry observers recognized how useful an open and transparent trading environment can be to new traders. However, it cautions users that knowing what motivated each trade is much more useful than passively following trades which make money. An over-reliance on other people's trades may lead to uninformed trading which can be dangerous, and says social networking functions should be used alongside other analysis to determine a personal trading strategy.
Retail currency trading has benefited from the openness of social networking as it highlights the importance of accountability.
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