Social Trading is the process through which online financial investors rely on user generated financial content gathered from various Web 2.0 applications as the major information source for making financial trading decisions. Socialtrading introduces a new way of analyzing financial data by providing a ground to compare and copy trades, techniques and strategies. Prior to the advent of social trading, investors and traders were relying on fundamental or technical analysis to form their investment decisions. Using social trading investors and traders could integrate into their investment decision-process social indicators from trading data-feeds of other traders. These socialtrading networks can be considered a subcategory of online social networks.
Prior to the emergence of the Internet, financial trading was characterized by the relationship between customers and brokers and was centered upon the physical locations of bourses and exchanges. Traditional notions of social trading consisted of people following successful traders via newsletters. As the internet has gathered momentum,electronic trading has become a major focus for the trade in financial assets amongst individual investors. The widespread adoption of social media websites, like Facebook and Twitter, was followed in the financial trading industry with financial traders making use of the knowledge-sharing capacities provided. Financial traders and investors use these services as additional sources of information.
Online financial trading companies have exploited the popularity of new social networking channels, enabling fully fledged social trading networks to emerge and use social networks as their model. Among the first such networks were Tradeo eToro and ZuluTrade.