Fin Tech

Social Trading and Its Implications: A Financial Technology Market Research Perspective

Written by Ju Jian Ngiam on  Digilah (Tech Thought Leadership).

Social trading is a form of investing that enables individuals to observe the trading behavior of their peers and expert traders, and to follow their investment strategies using copy trading or mirror trading.

It democratizes access to financial instruments such as options, as traders can make decisions based on other traders’ actions rather than analyzing raw financial data, which they may not have the time or ability to do so accurately.

While social trading provides a platform for investors to learn from and mimic other traders, copy trading is a specific subset of this broader concept.

Copy trading is an automated process where an investor’s account mimics the trades of a chosen trader automatically.

Social trading requires more involvement and understanding, allowing investors to pick and choose specific trades to follow rather than copying all trades from a specific trader. In some cases, social traders can make the opposite trade of the expert they are following if the trader has a bad reputation.

An example would be the anti-ARK Innovation Fund (ARKK) exchange traded fund, Turtle Short Innovation ETF, otherwise known as SARK. The ARKK Fund was once a respected exchange traded fund, but due to poor performance in recent years, an exchange traded fund called SARK was created to short the ARKK. The fund went up by 75%, while ARKK dropped by 50% in 2022, proving its mettle in the financial industry.

Key players in the social trading space include eToro, Moomoo and Robinhood, among others. These platforms provide a wide array of investment options, from foreign exchange and stocks, Exchange Traded Funds (ETFs) to cryptocurrencies, and attract traders of all skill levels. High Frequency Trading (HFT) firms like Tower Research, Domeyard are also relevant, as they employ sophisticated algorithms that execute large quantities of trades within split seconds, often at the expense of retail investors.

Social trading’s main benefit is its ability to leverage the collective knowledge and experience of a community of traders, otherwise known as the wisdom of the crowd.

It allows inexperienced investors to learn from more seasoned traders, potentially mitigating some risks associated with lack of knowledge.

However, social trading also carries significant risks. Copying a strategy without understanding its underlying mechanism can lead to substantial losses, especially in volatile markets. There’s also the risk of following traders who themselves may not be competent or who may be driven by emotions.

Furthermore, the tactics of HFT firms can distort market information, leading to accusations of market manipulation through their tactic of “Quote stuffing”.

“Quote stuffing” in essence is placing mass orders of trades and cancelling them last minute, with the intention of overwhelming competitors by having them process the orders and cancellations.

At its worst, this tactic caused the Dow Jones Industrial Average to fall by 1,000 points in a few minutes in 2010. However, these firms are necessary market liquidity providers, accounting for 50% of all equity trades in the United States as of the present.

Hence, social trading platforms such as this company, FollowTrade should have risk management features that can safeguard consumers such as stop limit orders for their own good.

My deep fascination with the intersection of finance and technology is my primary motivation for being in this space.

It led to me completing a certificate in Financial Technology at HarvardX, an online learning initiative by Harvard before matriculating. I learned about strategies like High Frequency Trading and intend to delve deeper.

My understanding of the industry’s intricacies, such as the tactics employed by HFT firms and the complexities of trading as a finance undergraduate has equipped me with a unique perspective.

This offers an unparalleled opportunity to further my knowledge and contribute to the dynamic fintech landscape. I am excited to apply my skills and passion to real-world research and look forward to the valuable experience this promises.

Most searched questions

What is copy trading?

Is copy trading legal?

Most searched queries

Exchange Traded Funds (ETFs)

High Frequency Trading (HFT)

Hello readers! Hope you liked what you read today. Click the like button at the bottom of this page and share insights with your colleagues and friends!

For more such amazing thought leadership articles on technology follow Digilah People

Fin Tech

CFOTech: A new door in Fintech Industry

Written by Uluc Yigit Sener on Digilah (Tech Thought Leadership)

Fintech means “Financial Technology” and this industry tries to merge two concepts: Finance and Technology. The main purpose of this industry is to make financial transactions and the financial sector much faster and more practical.

Exciting new developments continue to happen in the fintech industry with each passing day. We can see how much this industry has developed and grown as new ideas are given a chance and investments in this direction increase.

According to the research, this growth is expected to continue increasing in the coming years. Over the last decade, the FinTech industry has experienced significant growth.

The global market was valued at around $7.3 trillion in 2020 and is projected to grow at a compound annual growth rate (CAGR) of 26.87 percent up to 2026, according to Research and Markets, on the back of increased investments in technology-based solutions, supportive government regulations and the rising adoption of internet of things devices, among other factors.

As a sub term of Fintech, “B2B” translates as business to business but the term is a broad one. It is a technology designed for other financial service providers. Specifically speaking, B2B fintech most often targets a company’s CFO.

So, it is mostly related to the “CFOTech” concept. Companies often deal with problems when financial plans and strategies are required. At this point, CFOTech tries to offer financial solutions to be more transparent, sustainable, and appropriate.

Like the whole Fintech industry, the CFOTech industry is also growing year by year. According to the latest research, the CFOTech market is going to be 25.2 billion dollars in 2026.

Chief Financial Officers (CFOs)are the most senior finance position of the organization, they oversee the finance department and often are considered a trusted advisor to the Chief Executive Officer (CEO).

Today, CFOs use advanced technology while working and it opens a new door in the fintech industry. Like our company, Vteam Consultancy, many of the companies use these innovative solutions and technology together. Our new venture, Plansas, provides sophisticated solutions with CFO technologies. Plansas is an automatized SaaS platform that specializes in tailored financial solutions for startups, VCs, investors, and growth-seeking companies.

While new start-up developments are taking place in the world every day, new artificial intelligence tools are being developed to closely follow the developments.

Even using and learning these AI tools is becoming a competition for companies and increasing technological transformation. In this age of digitalization, the more closely companies follow developments, the more agile they become.

Trying to be more agile leads to an increase in the use of FinTech. By leveraging technology to automate tasks, they can deliver the same solutions for a lower price compared to traditional services.

Since the fintech industry and its sub-industries receive more investment and gain more value day by day, it also continues to create value in the industries. As the spotlight continues to be on this industry, it looks like life will get easier in the future.

Most searched questions

What is FinTech?

Can we use AI in finance sector?

Most searched queries

Chief financial officer(CFO).


Hello readers! Hope you liked what you read today. Click the like button at the bottom of this page and share insights with your colleagues and friends!

For more such amazing content follow Digilah People.