Why Social Trading is the Future and 3 Reasons to Take Social Trading Seriously
Among the main reasons brokers are interested in social trading are simplified trading, improved retention, and increased trading activity. But there’s a more important reason why brokers can’t afford to overlook social trading any longer.
Within the next decade, most brokerage clients will be from the Millennial (1981-1996) and Gen-Z (1997-2012) generations.
- According to a recent Fidelity survey, Gen-Z traders are the most likely to turn to social media influencers to educate themselves about trading.
- According to a recent Statista survey, Gen-Z were also the most likely to get their general news from social media, with the Millennials a close second.
Millennials and Gen-Z are:
- Digital natives
- Predominantly smartphone users
- Daily social media users
- They use their social networks to gather information, form their opinions, and guide their choices.
This explains the passive investing phenomenon. It also explains the Robinhood/WallStreetBets phenomenon.
Those brokers who encourage the social element of trading and create an environment where these interactions can occur will have a competitive edge going forward.
Why social trading should be taken seriously
1. It softens the learning curve
One of the biggest barriers for new traders is undoubtedly the complexity of trading CFDs. Introducing social trading allows newcomers to trade by following other more experienced traders. This easy and intuitive way of gaining market access has the effect of encouraging new traders to stick around long enough to start figuring things out for themselves.
2. Retention. Retention. Retention
Once that initial drop-off is averted, the social element raises trader engagement by giving them reasons to spend more time on the platform. Adding a social element to any online service has been proven to keep customers engaged, which immediately improves retention.
3. More trades, higher volumes
Encouraging traders to spend more time on the platform and providing them with resources to build their confidence are two proven methods of increasing trading activity among brokerage clients. Social trading helps in both cases. The social element increases time spent online and the access to experienced traders with proven records allows clients to trade with confidence before developing their own trading skills.