From a comment I posted on Today

The below was written as a Comment and Reply to a previous commentor regarding social trading in th eMargin Trading Products industry.

Rather than “illusion”, a better term for copy-trading and social trading is (was?) “marketable add-on service”. Of course there were few legitimate, successful trade leaders. There was no need for regulation, and anyone with a long-term successful trading strategy does not have enough financial motivation in a copy/social trading environment.

But what a great marketing strategy copy/social trading has been for the brokerage firms and the companies that create the copy/social software.  Copy/social trading was an easy sell to the masses initially; you did not have to be a “trader” to get the results of a “trader”. By appealing to non-traders, it increased the size of the target market for the Margin Trading Products (“MTP”) industry as a whole. e-Toro seems to have created a community and become the standard for copy/social trading. They have the winning formula for growing a business; proprietary software, a growing community of users, and an increasing eco-system of companies that are surrounding e-Toro’s platform (which further cement’s e-Toro’s position at the center of copy/social trading). MetaQuotes has those three characteristics as well which is why they have been successful for so long despite competition with superior products.

So like most industries and products, one or two copy/social companies will emerge from the pack and go on to dominate the space for copy/social trading. It seems at this time e-Toro has the lead there. This agreement with SwipeStox & FXCM is part of the natural growth efforts of mature company such as FXCM. It may move the needle a bit for FXCM. If so, it is a big win for SwipeStox. Despite the setbacks from SNB and subsequent financing events, FXCM is still a dominating player in the MTP space and they need to always be searching for growth avenues.

The reason I bothered replying is that I agree that copy/social trading will soon fade (except at dedicated firms like e-Toro). So the questions is…..what is the next marketable product/service that the industry can grab onto? What will drive the next round of new users and traders to the industry?


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