I could be wrong but I doubt there are many TSP subscribers who frequent as many trade rooms, chats, forums, trading groups, etc, as I do. Not that I am bragging or even particularly recommend that for everyone, as a lot is wasted time... but I do tend to pick up a lot of different trading perspectives, styles, strategies, and ideas, which I personally find enjoyable and usually enlightening (many times on what not to do).
One of the cardinal unspoken rules in virtually all chat rooms is "do not post a trade after the fact unless you have announced it in real-time." But of course there are invariably the jokers who love to brag about their nice wins ("I made $8700 today on gold futures") but never reveal the trade beforehand and certainly will never post a losing trade (conveniently forgetting to mention they lost $12,000 trading oil futures last week).
In one of my otherwise favorite chat rooms, there is one individual who invariably claims to have sold or bought almost the exact high or low of the day and by my reckoning must now be up about +1250% for the year if all of his mind-boggling claims were true. It is frankly insulting to other full-time traders trying to make a buck day in and day out and who understand that taking a loss is part of the deal.
But now we might be finding the ultimate antidote for those serial braggarts, a solution which allows one to call their bluff... specifically the relatively new expansion of social networking into the trading game. Paid services/brokerages have been out there for a long time which have allowed individuals to "mirror" real-time trades by "professionals" in their brokerage accounts. But the new "mirrored trading" phenomena takes this a step further, whereby individuals can allow others to replicate their trades in a social networking framework.
Of course, subscribers to TSP already have a very strong and capable strategist to '"follow" and a variety of trading strategies to select from. Nonetheless, I thought some excerpts below from some recent news articles were very interesting:
Crazy as it might sound, a new breed of online services and brokerages are betting that investors don't just want to meet and chat with other investors, but also turn control of their entire portfolios over to them. It's such a new development that statistics on popularity aren't available yet. But the trend's supporters expect it to catch on.
'Mirrored investing' allows you to essentially turn the keys of your portfolio over to another investor — sometimes a friend, other times a stranger. When that other investor makes trades in their own account, the trades are executed, or mirrored, in your account at virtually the same time.
If the investor you're following makes money, you ride along with them to riches. But if they flame out and lose money, so do you.
Mirrored investing brings social networking, so far just a technology used to trade photos, gossip and news with friends, into arguably the most private and important nooks of people's lives: their portfolios.
Joseph Fox, CEO of Ditto Trade, a brokerage firm created a month ago to offer mirrored investing, says:
This goes beyond sharing. This is attaching. You can now connect to investors who have been successful and put jumper cables on their trades.
The concept of mirrored investing has been bandied about for years, but the theory is going into practice quickly as firms are making it happen. It's intended for investors who recognize that it takes time, dedication and experience to research the stock market but who don't have the time themselves to dedicate to it, Fox says.
The concept of mirrored trading is simple and will be familiar to anyone who has used social-networking sites such as FaceBook and Twitter.
The first step is to find another investor you'd like to connect with. The mirrored investor sites provide tools to help you find other investors who have had strong performance. You can narrow your search to find investors who are succeeding with a specific strategy, such as focusing on large U.S. stocks or foreign stocks.
Once you find an investor you'd like to follow, you consent and then you're connected. If that trader makes a trade, it's made, in proportion to the size of your portfolio, in your account. It's based on the idea that some investors have the talent, time and energy you may lack to beat the stock market.
However, there is clearly the danger of investors giving control of their portfolios to strangers with inappropriate strategies. "It would be unfortunate for a near-retiree to mirror the trades (of an investor) ... who turned out to be a 19-year-old high-risk options trader."
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