People have been trading "socially" since markets were invented, and not surprisingly it still happens to this day. It's because the "social" in social trading caters to basic human needs, and these needs haven't changed.
We feel more comfortable when others confirm our judgement, and we like to follow others where we trust and believe in their methods. A friend once told me the need to be right is more powerful than the need to make money, which is one of the reasons why people hang on to losing trades when they should have cut their losses.
Social trading (social investing, social finance or whichever you prefer) in its simplest form is taking the same or similar position as another. Take a look at angel and venture capital investing, where the same people are often investing together -- because one believes in the other's methods.
My startup Roboinvest provides a real-time trade feed generated by what people are actually doing rather than what they are just saying. It's curated according to who you are following and where you can discover new opportunities you might not have discovered on your own.
The nature of our platform cuts out the noise and provides only the most important signals -- when a trader buys or sells through their real online trading account.
Social trading is now finally gaining serious traction, and it's because of a few megatrends that have changed the world over the past decade.
We're comfortable sharing our lives online with our friends and sometimes the rest of the world; platforms and devices are connected; and the global financial crisis reminded us that no one cares more about our money than we do.
Using a platform such as Roboinvest to discover new trading opportunities is no different than using Uber to get from A to B -- it's a form of collaborative consumption.
Social trading won't replace financial advisers and money managers, but it is providing a new channel for the self directed investor to continue to manage their own money with the help of a crowd of likeminded people who deliver them new opportunities in real time. There's no conflict of interest, and everyone is in it for the same reasons.
At the end of the day Roboinvest and other social trading platforms are communities, and the more you put in the more you get out.
Follow Michael Giles on Twitter: www.twitter.com/harland