Tiago Cardoso, Head of Business Development of INFINOX Capital, today commented on the rise of social trading – everything from currencies to commodities – in Latin America, describing the trend as the ‘perfect coincidence’ of three distinct trends. “First, interest rates (real and nominal) remain at a historical low across the region; in some instances, below zero in terms of return[1]. This state of affairs is likely to continue for the near future, so investors are looking elsewhere for return,” he said. 

“Secondly, the restrictions imposed due to the COVID-19 pandemic have normalised the idea of working from home, a key driver for the adoption of online trading, as we’ve seen in other markets.”

"Retail currency traders in the US nearly outnumber their institutional counterparts, and this effect is starting to take root in Latin America."

Since the beginning of the pandemic, technology – and e-trading, in particular – have ensured that trading volumes remain consistent despite work-from-home restrictions. According to Bloomberg, trading volumes across the board actually went up sharply in Q1 2020 (as the pandemic went global), including derivatives, most noticeably in outright forward contracts, which were up 40% in March.

“Today, for instance, retail currency traders in the US nearly outnumber their institutional counterparts; home trading precipitated by the trend towards home working goes some way to explaining that trend. And this effect is starting to take root in Latin America; according to research from the Global Labor Organization[5] 31% of occupations can be performed remotely in Argentina, a similar rate to those already seen in Chile (27%), Brazil (27%), and Uruguay (26%). So this is a trend that looks here to stay.”

"Social trading is a new type of trade; one based on collaboration and sharing, rather than out-right competition."

Last quarter INFINOX Capital saw record volumes of sign ups and trading on its own social trading platform, IX Social, across the region. Mr Cardoso went on to describe the most significant trend behind the rise in social trading as a distinctly demographic one. “Social trading literally turns the (traditional) competitive nature of trading on its head. Instead of competing with experts, traders can now follow and learn from them directly. In effect, it’s a new type of trade; one based on collaboration and sharing, rather than out-right competition. We are talking about millennial and Generation Z-aged traders, coming from a culture of the so-called ‘sharing economy’ and ‘crowd-sourcing’ solutions to problems. For them, social trading is a logical extension of the same,” he added.

Tiago Cardoso went on to offer some simple guidance for such ‘new traders’ – millennial or otherwise – looking to experience social trading for themselves.

  1. Stay informed: for a negotiation to be successful, you need to be well informed about the market. Read, study and stay on top of news about the market in general, especially the traditional financial market, which ends up dictating the rules.
  2. Participate in online trading communities: in the digital world, it is natural that more and more stocks are also digital. Participating in an application aimed at the online trading community will allow access to the main financial markets, while sharing knowledge, trading and experiences with traders who have similar ideas, which is called Social Tradin 
  3. Plan a budget: this is essential in order not to lose your money. As every investment has risk, the ideal is to create a plan with an amount that will be invested over a certain period. Thus, mitigating risks and having a better chance of having an advantageous return.
  4. Don't let emotions take over: although many beginner traders know this, trading based on an emotional impulse often results in a loss of money. Therefore, it is necessary to understand the motivations behind emotional trading to mitigate the risk of making bad trading decisions.
  5. Beware of scams - scams do exist and although scams may be evolving, you need to be equipped with proper knowledge and education before entering the market. Also, seek only to partner with reputable brokers who offer a variety of investment opportunities, in addition to complying with and being recognized by legitimate and prominent regulatory authorities.

This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. INFINOX is not authorised to provide investment advice. No opinion given in the material constitutes a recommendation by INFINOX or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.