The biggest leap in the fintech revolution: Autotrading. Some call it ‘Copy Trading’ and some call it ‘Autotrading’.
August 6, 2021
The biggest leap in the fintech revolution: Autotrading
Some call it ‘Copy Trading’ and some call it ‘Autotrading’. Surprisingly, this in itself immediately tells you a little bit about the platform you are looking at. One sounds passive and the other active.
The 'supermarket' copy trading platforms, want to relinquish responsibility so refer to it as copying, implying it has nothing to do with them and you enter at your own risk, whereas those with more professional traders, refer to it as autotrading, which assumes a level of conviction in what they’re doing.
So, what is the reason for this? Well, those who don’t wish to be associated with their traders tend to be run by brokers, such as eToro or AvaTrade, where volume is the only goal. They make money every time a trade is placed; it makes no difference to them whatsoever whether the investor makes money.
We even came across one social trading site offering copy trading, run by a broker, that advertised strategies that had a max drawdown of 100%. Now, I’m not sure if it’s my maths or theirs, but if you’ve lost 100% of your portfolio at any point, that is no longer a portfolio at all. Anyone linked to that lost all their money, but yet it was still on the site and it still had investors. Sadly, it wasn’t the only one.
Ultimately, all these platforms use the same software, but what they do with it, is very different.
You can ‘copy’ another retail trader, OR, you can let your portfolio ‘autotrade’ allowing the professionals to do the trading for you.
Those who advertise ‘autotrading’ are doing so with a very different mindset. They are showcasing professional traders for investors to link to and build a portfolio that will essentially trade itself. Companies like The Portfolio Platform that really only succeed, if the investors make money. They have a different and entirely more altruistic goal: for the investor to make a return on their capital.
If the platform is not the broker, then they don’t make money when you trade. They only make money if you’re happy with your portfolio and continue to subscribe. So here we really have the difference in a nutshell. Brokers profit when you trade, The Portfolio Platform only profits if the investor is happy. Those are two very different goals and ultimately the experience for the investor couldn’t be more different.
Let’s first have a quick look at exactly what autotrading is and how it works
What is copy trading/autotrading?
Modern technology has done amazing things in advancing the investment world. Most trades are made using one algorithm or another and computers are now deciding pretty much everything for us.
This particular piece of software allows any investor, anywhere in the world, to open an account with a reputable broker, and then simply link their account to someone with many years of experience.
It’s an incredible advancement in technology, but up until now, it has been simply misused by brokers. However, now The Portfolio Platform have built a professional platform that links only the best traders, not just, any traders.
Why would an amateur want to trade in their spare time, competing with professionals who have done it for years? If you were building a house, you wouldn’t build it yourself, you would go to someone with the relevant experience.
Trading is no different. To become a profitable trader takes years. Most investment houses won’t let anyone run their own book until they’ve got at least 5 years’ experience, so why would you?
Most brokerage sites state the percentage of retail investors who lose money on their platform. The average is around 76%. That means that only 24% of traders make money in the retail space. That’s a frightening statistic, but one that doesn’t seem to deter people from thinking they might be different.
This is the problem that copy trading/autotrading should be solving. The Portfolio Platform look for the best of the best within that 24% and showcase them for you to build your own investment portfolio.
Retail investors can now link up to professionals. It’s the perfect solution to the problem, IF and only IF, the right traders are made available. Most brokers don’t understand this, because their aim is trading volume, we do.
Does it make Investors more money?
It certainly should. Linking your account to professional traders is an amazing thing to be able to do. Investors can now sit at home, and let an experienced trader work all day for them, trying to increase the yield on their portfolio without lifting a finger.
However, some brokers are misusing this software. As we have already mentioned, most of those who advertise ‘copy trading’ don’t care if you make money. If you scroll through the brokerage sites, most of the advertised traders are nothing more than part time amateurs themselves.
On eToro for example, it doesn’t cost you anything to copy one of their traders. This should immediately set off alarm bells. They claim they don’t charge commission; they don’t charge to link up to their best traders, yet their revenue for 2020 was $600m.
They just need you on their site in order for them to make money out of you. Every time you trade, they take a piece of your portfolio and they don’t need to even make you aware of it.
For them, volume is the money maker and sadly therefore, the only thing that matters.
For The Portfolio Platform, the thing that makes money is having a selection of the best traders from around the world. They’ve carefully selected them, so you don’t have to. Their traders average return last year was 49% with an average drawdown of 24%; and this was in a year that broke many hedge funds.
Why would an investor use it?
To put it simply: to make money. The best traders do, famously, make a lot of money. Three traders on TPP made over 100% last year for their autocopiers. There is no other way, or investment where this is possible. Of course, this doesn’t come without risk, but professional traders understand risk, and showing us this, is a key part of the selection process to become a TPP trader.
Retail investors chasing big returns is a dangerous game. Most don’t understand the data or what they’re looking at, and focus primarily on return, which on its own, only tells a very small part of the story.
This is the exact reason why The Portfolio Platform was developed. We don’t just allow any traders on our site. We only accept professionals who have made it through the rigorous selection process, and even then, not all make it ‘on platform’ after their trial.
TPP was developed by 2 traders each with around 20 years of experience in the markets. We know what we’re looking for when it comes to reliable returns for appropriate risk. The problem with copy trading sites, is that there is no selection process to become a ‘trader’. They want to distance themselves from any responsibility as they don’t trust their own strategies. They allow anyone on, and anyone can link-up to them.
Most platforms are set up by brokers who want volume, The Portfolio Platform was set up by traders whose goal was to make investors’ money, and whose model only works if they succeed. We are finally using the software in the right way, for the right reason. Our platform was built for you.
“TPP might just be about to revolutionise investment for the retail market.”
- London Stock Exchange 2020