Are Social Trading Platforms the Way of the Future?
Dear Energy and Capital Reader,
My name is Lillie, and I’m a first-year college student currently studying at the University of Amsterdam in the Netherlands.
Given my many years of experience, I can safely say that I don’t know much about most things; however, I do know a good opportunity when I hear one, and when my uncle offered to pay me to write 1,000 words on the Amsterdam Fintech conference, I jumped at the chance.
This past week (May 31 to June 7) was Amsterdam Fintech Week. One of the exciting new startups made an “AI trading platform” called RevenYou, pronounced like “revenue.”
(It should be noted that the event was expertly organized and beautifully pulled off — definitely a good networking and learning event to try and attend if you’re around Amsterdam this time next year. Keep in mind that you do have to say you’re from a company when you register on Meetup.)
Algos for the People
One of my big takeaways from the week was something I gathered from listening to the RevenYou pitch. I learned a lot from that one, actually. For example, I learned that one of the first stock markets in Amsterdam was the Beurs van Berlage.
And from there I learned just how much the stock market has grown, not only in Amsterdam, but globally, shifting from building to building to a more internationally high-paced, high-stakes environment. But, as was pointed out, those who could utilize the stock market were few and far between, not only for lack of know-how, but also due to location and starting wealth. However, RevenYou and companies like it have a plan to change that.
Due to the vast improvement to accessibility technology has gone through in recent years, simple trading platforms like Peak in the Netherlands and social trading platforms like eToro and RevenYou (once its released) have started invading app stores.
They are platforms aimed at ordinary people who want to invest in stocks but maybe don't have the time, don’t have the know-how, or simply want to make connections with other people who do know how.
RevenYou, for example, is angling to have its app separated out into two groups: those who like to make trading algorithms (the AI part of its “AI trading platform”), and those who don’t know how to trade at all and would therefore like to use said algorithms.
For those in the know, the app is going to take on a much more social side, connecting users from around the globe with one another so they can work together to create the ultimate stock trading algorithms. For those without the know-how, and who don’t know how to trade on their own, the app will offer them the algorithms that the other group created and present them with a RevenYou-produced top 10 algorithms list. This combined with ultra-fast trading should mean easy money for all users.
eToro works in a very similar way but instead of algorithms, those in the know create portfolios, and those who are starting out also get a platform to discuss with other users (including those who know).
Peak is an app that is currently tied to the Dutch banks. Users are given the opportunity to do one-off investments, daily investments, monthly investments, or use its premiere feature, change investment. With this last feature, whenever you pay with a bank card, you can elect to have your bill rounded up to the nearest euro, and the difference between the actual price and the rounded price gets invested into one of four portfolios: mild, spicy, hot, or flaming — effectively turning your pennies into dollars.
So now that we know some of what this new wave in trading is like, it’s time to ask ourselves if this next step is, in fact, a good step.
From my understanding, depending on which platform you use and how you use it, like with everything, it can be very beneficial. If you have no idea what you’re doing, it can be a very good way to dip your toe in the water while you’re trying to learn. If you’re already good at picking stocks but you don’t want it to be your job, this could be a good way to make some additional money by offering your portfolio up for others to copy and raking in that commission on top of what you already make by investing.
At the very least, it may be worth scoping out because I have a feeling that when this new wave in stock trading starts to crest, it will completely take over how things are done.
With all these additional people getting skin in the game, and with everyone using the same trading algorithms, causing everyone to buy and sell collectively all at once, stock peaks will become steeper and the valleys even deeper.
If this really takes root, algorithms will become exceedingly more efficient, and a vast majority of investors will be using very similar, if not the same, trading algorithms, which will cause a sort of false stability in the market, also making it very hard to truly “win.”
Yours from Amsterdam,
Energy and Capital
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