For the first time in several years, a new online stockbroker has emerged with a (somewhat) unusual business model: Ditto Trade. So what makes Ditto Trade special, and is it worth your time?
Ditto Trade provides the usual stock, options, and forex trading services with a twist: it allows you to “mirror” (that is, watch and/or automatically copy) the trades by other, presumably more experienced investors, whom they call Master Traders. Anybody can sign up to be a Master Trader, and these Master Traders can choose to charge their followers a monthly subscription fee. In this way, Ditto Trade’s business model is similar to that of Covestor, which also allows paid portfolio sharing.
The big difference with Covestor is that there is no minimum fee to share your portfolio, and Ditto Trade doesn’t take a cut of the fee, so this system could be easily adopted by, say, a daughter that just wants to follow her father’s trades, or a bunch of friends who want to follow one particularly enthusiastic trader among them. Unfortunately, you can only follow one Master Trader per account, which means that you can’t really share trades among a group easily. (For that, you might try a site with built-in community like Zecco.)
So, is this a good thing? Well, that depends on the quality of the Master Traders, of which there are only 4 at this time. While Ditto Trade’s Master Traders seem like nice guys, the site provides no data at all on their actual, recent trading success. Covestor, in contrast, provides much more data about the current performance of their traders.
Otherwise, there’s not much to distinguish the trading platform. Commissions are low ($4.95 per trade, plus $0.50 per options contract), but you can do better at Zecco, plus get free trades every month. Forex trading is not integrated into stock and options trading, which is typical of brokers that clear transactions with Penson.
Upshot: Ditto Trade could be an interesting platform for an active trader who’d like to build a business around his superior trading acumen, or perhaps a group of family or friends where one member provides the inspiration for the others. However, if you just want to do basic stock and options trading, cheaper discount brokers are easy to find.
If you have personal experiences with Ditto Trade, we’d love to hear about them below. We’ll keep this review updated as we learn more, too.