In this interview we’ve had the pleasure to sit down with Sarah Brylewski, Managing Director at Bux Markets, which offer traders both the ability to trade for themselves and/or copy other traders’ dealings via their social offering.

Millions of people use social media such as facebook. They exchange news and opinions, add friends and keep in contact disregarding any physical distances. This kind of exchange can also be very beneficial for retail investors, and there’s already a term for it – social trading. Ladies and Gentlemen, welcome to Börsenplatz, our finance-talk.

Interview with Sarah Brylewski, Managing Director at Bux Markets

Tell us a little about Bux Markets?

Today, we’re going to prepare you for the upcoming Invest exhibition, which is going to be all about social trading this year. More and more trading platforms that focus on this topic spring up every single day – but what are their benefits for users and how do you find the best platform for your requirements? In order to answer these questions, I’m going to have a discussion with Sarah Brylewski, German CEO of Bux Markets, which is a CFD trading platform and broker. She’s also speaking for Bux Markets, which is a social trading platform.

So, Miss Brylewski, how exactly does social trading work? If I’m understanding this correctly, I’m going to need a hero of sorts that I want to follow.

“Yes, that’s correct, social trading is going to be a huge topic at this year’s exhibition. Basically, you have lots and lots of traders who opt to share their knowledge with the community. As a user, you can follow certain signals that these traders share with you – it is a bit comparable to copy trading in that regard.”

Tell us some of the unique benefits that Bux Markets offers?

What is a Social Trading Platform?

I see. So, you’re looking at the decisions that other high-profile traders make and can follow their lead. In order to do that, you have to be on a specific online platform, which there are countless of on the Internet. What are the different social trading models and where do I start as a user?

“Basically, there are three different kinds of social trading. Firstly, there’s the classic message board, where users can discuss various trades and market trends. Secondly, there’s a model based on certificates, where traders can upload their portfolios and other users can buy access to these lists. Finally, there’s the model we offer at Bux Markets, which offers a trading platform where highly experienced traders as well as newcomers meet. Somebody who’s new to trading can choose to follow certain traders in order to make better decisions.”

Bux Markets: What are Top Traders and Followers?

In theory, does that mean newcomers get an edge on other newbie and experienced traders?

“Yeah, that’s definitely not unrealistic, because you can mix up strategies and signals from several different top traders to enhance your portfolio. This way, you could become much better than a single top trader yourself.”

Let’s look at the added value that social trading can provide. As you can see, there are multiple elements which work in conjunction – how exactly do they create this surplus value?

“Well, first off there’s a huge demand on the consumer market to make individual investments without the need of a bank. Also, investors are always looking for ways to maximize their yield, and social trading can help you do exactly that by combining your own decisions with community choices. Studies show that this method can improve your rate of return up to 30%.”

Looking at your graphic, there’s also independence and transparency which is supposed to convey that you can learn to make your own trading decisions by learning from experienced traders. But how does one find the perfect trader to learn from? Should I look for a highly experienced trader or someone close to my level who’s more successful?

“The first step should always be to orient yourself. There are more than 1200 traders on our platform, which means you have to filter for the best qualities you’re looking for. Our team at Bux Markets made this graph to illustrate an exemplary trading career including potential qualities of each step. Each beginning trader starts at Street Trader level, but anyone can reach the top if they put enough time into trading. What’s most important is that the lower levels are more focused on high-risk trading, while higher levels are based on great long term performance with more safety.”

That’s very interesting – but every trader probably has their phase where nothing works at all or their yield is at an all-time high. How do I protect myself from such short-term flukes as a consumer?

“Your first step should always be to set a stop loss, just like in regular trading. You also need to check your traders on a regular basis in order to evaluate their decision-making. What’s special about our platform is that you don’t have to follow your traders on every step, so for example if one of your top traders often buys into Euro-Dollar-trades, you can specify that you don’t want to follow them on these kind of trades.”

Or you can do the exact opposite and only buy into such risky trades in order to hit the jackpot. [laughs] Do I have to do everything with real money or can I set up a test-account in order to get to know your platform.

“Yes, that’s certainly possible. On the other hand, you can start with a deposit of just 100 Euros if you prefer to trade with your own money right away.”

Ok, so, let’s talk about the best way to get started and how to find the best setup. What do I need to keep in mind when I begin to follow my first traders?

“You have to pay attention to the fact that not every trader with a good performance record will be suitable for your portfolio. In the end, you’re looking for long-term success, and not high-risk short term trades.”

One more question about that: Do these high profile traders all use their own money or could they just run a virtual portfolio, which might look great but isn’t really based on reality where your own money is on the line?

“Absolutely. There are both options, meaning that all traders can choose whether they’d rather run a virtual portfolio or use their own money. Our customers definitely prefer when their followed traders use their own money, since everyone is on the same page and all participants win or lose the same way.”

So, where do we go from here? We’ve just made our first steps into social trading and now it’s time to make the best use of the given tools.

“That’s right. It’s crucial to keep in touch with every action your followed traders carry out and to set a stop loss. In this regard it’s not that different to regular stock trading.”

You also have to do money management, meaning that you have to give each trade its own priority. Can you give us any guideline for doing this with social trading?

“Well in my opinion, social trading is the perfect addition to a nearly complete portfolio. Most of our customers have a separate account for regular trades and use another for social trading.”

I see, that way you eliminate the biggest risks. Thank you very much for your remarks.

Ladies and Gentlemen, there we have it – social trading. A new phenomenon with remarkable learning effects and benefits for newcomers who can act on signals provided by top ranked traders. All of this should of course not be done without some risk management in order to keep control over your assets. Thanks for watching and see you next time.