Trading 2.0: Expertise Becomes Transparent

The rise of the Web as a social medium has changed the ways in which traders and investors manage their money. Growing social and information networks have provided us with greater information and more money management options than we've ever had before. It is this changed financial landscape that I'm referring to as Trading 2.0.

One of the important elements of Trading 2.0 is that expertise becomes transparent. Thanks to the online medium, we are now able to see exactly what expert traders are doing and how they're doing it.

Consider the VesTopia site, which is now in beta and offering free registration for traders. A group of pre-screened "investment directors" (experienced money managers with verified track records) post their strategies and their specific trades to the site. Site visitors can follow the directors whose strategies most interest them and develop trading/investment ideas from the portfolios of those directors. Best of all, blogs written by the directors explain their strategies, market views, and stock picks. This latter feature turns what would be a fine informational source into an educational one.

A great example of the educational content is Mark Hines' recent post in which he illustrates specific stocks to buy that enable investors to participate in hedge fund returns. It is rare that individual traders would get to hear ideas from managers of billion dollar funds and model their ways of thinking. That's a huge benefit of Trading 2.0: the opportunity to learn within a social network.

A different form of transparent expertise can be found in James Altucher's StockPickr site. Here stock picking becomes a social activity, as members share their portfolio selections. An added, unique feature, however, is that the site also tracks the portfolio maneuvers of leading money managers, so that you can see what the pros are doing. James constructs a variety of spotlight portfolios, such as "Great 5-Year Charts", which highlight stocks that have attractive technicals, fundamentals, and sponsorship.

The appeal of the StockPickr site is that it takes traders and investors down the path of thinking thematically. Instead of narrowly focusing on single markets and instruments--which may or may not have opportunity--visitors to the site can identify broad themes that are attracting professional interest.

Over time, I expect the Trading 2.0 wave to bring additional innovations, as trading and portfolio management become public activities that attract attention (and assets) by combining ideas and education. In upcoming posts, I will explore further changes to the financial landscape wrought by the social revolution in computing.