What is CrowdTrading?

CrowdTrading is one of the online trading industry’s freshest innovations, and we couldn’t pass up the opportunity to share our thoughts on it. You’ve all probably heard of crowdinvesting and crowdfunding, which help startups to secure investment capital from large groups of people, with each person putting in a relatively small amount.

The basic principle is democracy – the best crowdfunded ideas can easily find thousands of people willing to invest, and they’re usually the ones that succeed. Gone are the days when only the big banks could decide which businesses were worthy of funding. And now a similar idea is making its mark on the financial markets. CrowdTrading uses the decision-making power of a large group of Traders.

There’s a ton of scientific research to suggest that over time, large groups of people have an inbuilt advantage at decision-making over individuals – even the supposed experts! The phenomenon is known simply as “The Wisdom of the Crowd”. And that’s really where CrowdTrading differs from Copy Trading, Profit Follow or Social Trading – where you basically copy the positions taken by more experienced investors. The trouble with experts is that they can get it wrong. Even Warren Buffet just had his worst year since 2008, losing $2billion trading IBM stocks!

CrowdTrading – how it works?

CrowdTrading is an excellent option for people who want to start earning money without any knowledge of Forex or the stock market. Pretty much like with binary options you don’t really need to analyse any charts, or deal with complicated trading platforms. It more or less boils down to choosing “buy” or “sell” after taking the momentum of the Crowd into consideration.

You are more confident in your decision if the majority is doing the same thing. For example, you are considering buying the Apple stock, but you are not sure if it is the right decision at this particular moment. The live feed in the broker platform shows you that 77% of traders are currently buying Apple stocks, so what would your decision be? Clearly you are going to buy as well, and in the long-term, history shows that crowdtrading is profitable.

Some people, naturally, prefer to go against the crowd. With crowdtrading you can easily do that as well, but it is still up to you what to do. Those people who study human behaviour have noticed that missing an opportunity to earn with the crowd is a worse form of demotivation than the fear of losing.  The good thing about crowd trading as compared to investing into profitable traders (known as PAMM or MAM accounts), is that you are responsible for your trades and no one else. You make the decision, not some other guy, who could be responsible for losing all your money. And that independence, backed by the guidance of a like-minded community, is why people get into online trading in the first place.

CrowdTrading – where to try?

The new way of online trading is not currently available with major Forex or Binary Options brokers, but there are couple of trailblazing companies operating in this field: Crowd Trading and Trade360. Both are EU-regulated, provide encrypted connection, offer a range of fast and secure deposit methods and have a wide variety of different assets to trade on.

Crowd Trading is a Swiss company dealing primarily with French traders. Their interface needs work to improve the UX, but the basics are as follows:

You have to register and open either a real/demo account, then choose one specific crowd that you want to join and trade with. You can then pick an asset and propose that the crowd trades it. If everyone agrees, you make the trade and make either a profit or a loss as a crowd.

Trade360, on the other hand, offers much more freedom in your decision-making. It was pretty easy to register, since as you can choose a Google+ or Facebook account for quick authorization. It saves a lot of time when you just want to see how it all works. Trade360 trading platform is innovative and simple, so we are going to explain crowdtrading using their platform as an example.

Here’s how the platform looks:

The dashboard is fairly similar to any binary options trading platform, presenting a wide variety of assets. On the right hand side you can see the Live Feed which tells you about latest trades made by other users of Trade360. The Live Feed contains a series of “Crowd Event” boxes. They show you significant movements on a wide range of assets, including currency pairs, commodities, stocks and ETFs. These movements are often tied to the big economic events that all serious traders have in their diaries.

Each Crowd Event tells you the percentage of people who are buying and the percentage who are selling.  Clicking a Crowd Event opens up a Trading window. If you want to see the movement of an asset over different time periods, or learn more about the asset or event itself, you just click the expand icon in the bottom right corner of the Trading window and the data is right there for you.

As an example, let’s examine stock in Barclays Bank.

You have all the necessary information to make your decision: daily volatility, daily % change, live chart with lots of instruments (similar to MT4) and most importantly, you have crowd information. Trade360 analyses all of the trades made on their platform, so for example, on the screenshot you can see that more traders are currently buying Barclays shares than are selling them, by a ratio of 60% to 40%.

Traders from the United Kingdom are buying even more – the ratio is 64% to 36%. Since Barclays is the biggest bank in UK, it makes sense that British traders might have more knowledge about this asset, and you might therefore be more likely to follow them when making your trading decision.

You don’t always have to go along with the majority, of course. You make your own decisions according to personal knowledge, insight and intuition.

When you’ve made up your mind, you select the number of contracts you want using the +/- symbols and the price in US dollars is shown above. Then you just click SELL or BUY and your position is opened!

Depending on the margin of each asset, you need a different Dollar amount for trading the same number of contracts, which is different from binary options and more realistic.

If you want to experience Trade360’s take on CrowdTrading for yourself, they’re offering a USD 50 bonus to all new traders. It’s very easy – you just need to verify your phone number.  Well worth a go!

Trade360 (owned by MPF Global Markets Ltd) is fully regulated in Europe holding an CySEC licence, number 202/13.