The rise of social trading via collective groupthink is a real opportunity for brokers to help grow their businesses and show their speculative clients they are welcome.
Rise of Social Trading Influence
Individual traders are finding a voice within social media technology, and the ability to collectively share their thoughts and ideas among peers is causing a flurry of new speculative fever. Across old and new financial assets, waves of speculation are growing. This has created a sincere amount of fear within the financial industry, which has been heard through media and demonstrated with the real-time suspension of certain assets. The list of frozen assets temporarily that have not been allowed to be traded by certain brokers who faced significant risks is well known.
However, while groups like Reddit’s Wallstreetbets.r may be perceived as a threat to brokers, this moment in time will likely prove an opportunity for brokers and other financial institutions that are prepared for the rise of social trading and its influence. When handled correctly, brokers with great trading platforms will find themselves at the forefront of this new revolution within the world of trading and become even more profitable.
The ability of individuals to act as part of a crowd using social media gives them purpose and a way to use groupthink and take collective actions. It doesn’t mean, though, that their world will become easier or any less dangerous to trade; speculators are still primarily individuals battling the dynamics of an ever-changing marketplace.
Brokers and financial institutions who stay attuned to social media, pay attention to its scope and understand the momentum it causes will have the capability to provide clients with their insights and relay these advantages as opportunities for traders to speculate safely.
Embracing Volatility in Business with Data and Liquidity
Volatility will likely increase in financial assets like social media outlets like Reddit via groups such as Wallstreetbets.r, Twitter, Instagram and others continue to penetrate the marketplace and create additional waves of actions by their followers as they try to influence trading. However, this doesn’t mean they will always be right; in fact, the majority of traders will often find themselves having to swim by themselves within volatile waters as they navigate positions. Their individual choices of leverage and timeframes, not to mention the decisions that have to be made regarding risk management techniques, should be guided by brokers who can offer counsel.
Brokers with the ability to offer clients a chance to pursue their chosen assets as they suddenly become popular; offering their agents as guides to the traders who can help the clients make decisions is certainly a unique selling point. It gives brokers a chance to increase their appeal and show legitimate concerns regarding their clients’ choices.
Financial institutions and their affiliated brokers will be able to converse with their clients as the appeal of ‘Us vs. Them’ grows within the retail trading world. The capability to show clients that brokers and agents function as supervision and embrace the rising trend of ‘David vs Goliath’ in trading needs to be heard. Brokers, via their state of the art technology and liquidity provisions, can be a part of this new trading world as social media and its ability to attract more retail speculators gain strength.
Telling traders they are part of a team that wants them as speculators and will be helped will generate positive and profitable business for brokers. The tools brokers have, and use are always important. Transaction and liquidity security is always a vital component of the brokerage business.
The ability to guard against unbalanced volumes via suddenly growing positions in certain assets creates risk scenarios that brokers and their risk management teams desire and need. Assuming they have the appropriate technology to efficiently manage these risks and a partnership relationship with a liquidity provider that will offer favourable trading conditions.
Managing Risk and Keeping Clients Secure
Greater business opportunities exist for brokers who know how to communicate with their clients effectively. Brokers know their traders will make their own decisions regarding the use of leverage, and because of increased volatility, traders often fall victim to unplanned volatility. For instance, while social traders may have driven up the price of certain equities, they were not quite as effective as maintaining higher ranges and some speculators indeed lost money as underlying values were questioned.
Brokers should look for a technology that allows a transparent stream of data to gauge the fast pace of the markets as it will help to embrace the potential of increased trading volumes. The use of liquidity management offers institutions and brokers a way to help and hedge their clients trading while allowing their internal risk teams to work comfortably, knowing trading positions are secure and cover many speculative scenarios.
Benefiting Both Sides of the Coin
Trading via new-generation platforms provides brokers with the capability to combine their liquidity protection into transformational trading data and risk management. They can manage the speculative storms of volatility which are growing as the social media influence generates more trading power.
The growth within forex, cryptocurrencies, commodities and equities, including indices, is an opportunity all brokers know is attractive. The rise of power from retail traders via the influence of social media outlets is an opportunity, and it will grow.
Retail traders who work with brokers who use the right technology and liquidity providers will understand the broker’s confidence. Individual traders will feel all trading circumstances can be maintained even when speculative fever is growing. Brokers who can assure traders their speculative positions are safe and positions can be traded without worry will find many intense business days ahead.