What is Social Trading

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What is Social Trading?

Like so many internet buzzwords, the term “social trading” gets thrown around quite often (and rather loosely). While some out there are quick to dub “social trading” the be-all and end-all of online trading, there are still many traders who are wondering “what is social trading?”

Social Trading Basics

Let’s get down to basics: at its core, social trading is about sharing information. While every trader in a social trading network retains their private trading account, in order to participate in the social trading environment, they agree to share certain details about their trading activity.

These details might include the instruments they trade (currency, commodity, index, stock, etc.), the entry and exit rates at which they bought/sold the instrument, the percentage of gain/loss etc. Not to worry, as far as we know none of the social trading sites divulge the actual monetary amounts of investment in each trade. If you run into one that does, it’s advisable to stay away as you don’t want to run the risk of becoming a target.

What is social trading good for?

The answer is simple: by seeing what others are trading and the kind of results they are getting from their trading strategies, you are in a prime position to learn new techniques, gauge market sentiment, and be exposed to trading ideas from around the world. You are no longer confined to theoretical charts and figures, or market news; instead, you have direct access to what thousands of traders are doing in real time, and you can use that information when making trade decisions.

The downside, of course, is that no matter how many times the wisdom of the crowd wins, there will also be times when it fails. It’s always best not to follow the herd blindly, but rather take the data from your social feed into consideration along with traditional market info sources.

Most social trading platforms stream live information generated by their network through “live feeds” – much like the feeds you’re used to seeing on Facebook. However, some also borrow additional elements to bring you more concentrated information and even data analysis. For example, eToro, one of the more popular social trading platforms, collates the live trading data to create a “profile page” for each trader, that consists, among other things, of trading statistics that give a clearer picture of how successful each trader’s strategies really are.

Copy trading: taking social trading to the next level

Combining online trading with aspects of social networks is all good but when asked what social trading all about, most people will answer: copy trading. You see, while live streaming information is a nice addition to any trader’s routine, copy trading is truly a game-changing way to invest in the markets. It’s a way to take practical advantage of other traders’ know how and use it to advance your own trading game.

As you may have guessed from the name alone, copy trading is copying other traders’ trades automatically – or semi-automatically, depending on the individual social trading platform.

On the most basic level, this involves choosing traders to copy and deciding how much money you wish to invest in copying them. The trades are then copied automatically with the proportionate investment amounts, based on the percentage of funds invested in the original trade. In a sense, copy trading is much like a managed account (in fact several regulatory bodies have officially classified it as such) – even though the traders your copy don’t work directly for you, you are essentially letting someone else make the trading decisions for you.

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How is social trading different from other automated trading strategies?

For starters, social trading takes the trading decisions out of your hands and places them in the hands of another person rather than an algorithm – for better or for worse. For better because the real person is staking their own money on the same investments, so they have an extra incentive to do well, and because they have the flexibility to adapt to live market situations. For worse because, well, being human, they are susceptible to human errors and emotional outbursts..

The real difference, however, and social trading’s real advantage, is the amount of control you retain over your account. With algorithm or robot trading, once you hand your funds over to the algorithm, you can no longer make any input in the development of your positions.

The same is not true for copy trading. Many platforms will allow you to take a number of steps to control your “copy relationship”, from enabling you to place stops and take profit orders in order to manage risk, to giving the option to take over a copied trade – thereby severing the link between it and the original trade and placing it in your hands entirely.

Conclusion

So, what is social trading all about? It’s about connecting with people and giving you the tools to use the knowledge and know-how of others to your advantage. How much you want to rely on others to make your trading decisions is up to you. You might want to simply use the social trading network of your preference as an indicator of investor sentiment, or you might invest most of your account in copying a variety of traders, there is no right or wrong way to go about it!

The important thing is to understand the benefits of social trading as well as the risks involved so you can make the best out of your social trading experience.

What is Social Trading?

Social trading is a new and exciting way to delve into the world of online trading. It’s said to be the most recent evolution of online trading and offers a unique take on the analyzation of financial data and conducting trades. Social trading utilizes social networking trading platforms to exchange financial information, compare and copy trades, techniques, and trading strategies of fellow investors. Social trading allows both novice and experienced traders the opportunity to more easily overcome the learning curve and benefit from the best and most experienced traders. The idea of social trading was first brought into effect in 2004 by the company called Tradency. Due to the increased use in social networks, there became an increasing desire to utilize social networks in trading platforms. Hence the evolution of numerous social trading platforms. Now, more than ever social trading has become very popular among investors of all levels.

Social trading sites provide their users with a variety of community based tools to share and further develop their knowledge for making more informed trading and investment decisions. Such tools and features include; the ability to view other users’ portfolios, analyze their trading history, current trades, and overall performance. You can read their news feeds and see where they pull their information from. You can communicate on forums, ask questions, exchange insights and strategies, and even develop important investment relationships. All this transparency can be very useful in developing your own strategies and making informed trading decisions. But not only can you learn from all this, you can strait up copy a trader’s every move if you choose with a feature called “copy trading”. This allows you to experience first hand which strategies work, what to invest in, and how to become a successful trader yourself.

How Can Forex Social Trading Benefit You?

Social forex trading can be especially beneficial to a new and inexperienced trader. As a novice trader in the forex market, it can be very difficult to learn the ins and outs of trading forex. There is a very steep learning curve and it can be a daunting task to delve in and start trading on your own. Therefore, social trading is such an attractive and beneficial option to new traders and investors. It gives them the ability to learn what works from other traders, and provides you with all the necessary information in an interactive, community based platform. Besides this, I’ve outlined some key beneficial factors below.

  • Traders of all levels can benefit from a social trading platform – You now know how a novice investor can benefit from copying the trades and learning from a more experienced trader, but they’re not the only ones who benefit. Traders who are followed receive commissions on their winnings from those who copy them. So why not trade forex on a social trading platform right? Also, even successful traders can learn and copy other traders to expand their expertise or delve into areas they are interested in, but not well educated about.
  • You can benefit from various trading styles and methods – On social trading platforms, you can choose to follow and copy whoever you want. You may take a riskier approach copying trades with high volumes, or be more conservative with smaller volumes traded less frequently. The traders risk level, success, and history is all available for you to make an informed decision based on your needs.
  • Social trading offers more informative analysis – Instead of analyzing data and trends yourself to predict the market, you have a whole group of people sharing their thoughts and tactics with you. You can ask questions in forums, and engaging users will be happy to shine light on any thoughts you have.
  • Forex trading can be somewhat mundane, but Social forex trading is fun – Trading can be lonely and mundane, but trading on a social network with like minded people, interacting, providing insight, showing off techniques, and making money is an exciting way to trade forex. Some of these social trading platforms offer competitions and tournaments to add another level of excitement and fun to trading forex.

Copy Trading

Copy trading is an amazingly innovative feature in the world of social trading. It’s what attracts so many users to the social trading platforms. Unlike mirror trading, copy trading allows traders to automate their trades by copying the movements another investor makes in real time. If they make a trade, you trade; if they win, you win; and if they lose, so do you. You set the amount of funds you want to allocate to this copied trader and the trades they make are proportionate with the amount of money you attach to them. It’s a very useful feature for traders who don’t necessarily have the time to trade as a traditional forex trader. You can simply fund your account, leave it alone and hope to see it grow, or you can monitor and learn how they trade.

When copying a trader, you do have some flexibility and can set your own stop losses/take profits, choose what positions the trader has you want to copy, and choose to discontinue copying if you please. There may be different rules and regulations pertaining to copy trading depending on the platform you use.

This is a new form of trading, and is becoming increasingly popular with many people creating full “people-based” portfolios. Instead of watching trends in stocks or forex, they create a portfolio based on the people they copy and follow. It’s similar in a sense that you still should analyse graphs, their historical data, risk score, and strategies used. Like other portfolios, you need to keep up with the latest trends and what your investors are doing. If you are not happy with someone, you can drop them and move your funds somewhere else.

Pros and Cons of Social Trading

Social trading is such an attractive option, with all the transparent information between successful traders. Their strategies, insights, and everything out in the open, how could you go wrong? By now you’re probably thinking, “Wow…social trading seems amazing! All I have to do is copy a successful trader and watch my money grow…It’s so easy!” Well, yes it can be very profitable and a viable solution for an inexperienced trader looking to break into investing, but like all investment platforms, there are advantages and disadvantages to trading on platforms like these. See below our complete list of the pros and cons of social trading.

  • It’s possible to make money without too much effort on your part. That is, if you take the time to make an informed decision on who to copy. If you do find a viable trader to copy, there is much potential to make money with little to no more effort, (passive income).
  • You can join in and start trading with very little knowledge of the market. For inexperienced traders, they can learn from being active in the platform, copy other traders, ask questions, read news feeds, and study all the viable information available via the social platform.
  • It can be better than making those tough decisions yourself. If you are an emotional trader who can become very stressed, lose a lot of sleep, or breakdown from the wrong decision. It can be best to let someone else do this and copy their positions without thinking much of it.
  • You can manage risks more effectively by following a diverse number of traders with smaller amounts. There are many successful traders on social trading platforms with various strategies and risk scores to choose from.
  • Social trading platforms are generally simple to use and have intuitive interfaces with access to everything you need with their magnificent level of transparency.
  • Whether you’re trading manually or copy trading, its still very risky. Especially in the forex market-its pure gambling.
  • Finding a reputable and successful trader to copy can be a daunting task in itself. There are many trending and successful traders out there, that still might be a bad option to copy. There is still risk involved in copying even the best traders.
  • Past performance is not indicative of future performance. Therefore, a trader who has a very successful trading history may lose large on one trade, or change up their strategy and become riskier. You must always be aware of the risks involved, nothing is 100% safe while investing.

Social Trading Platforms and Brokers

With the popularity of social trading in recent years, there has been an increase in these types of platforms. Many of the best platforms out there offer the same types of services such as copy trading, and the ability to communicate with one another. Since social trading platforms thrive on being social, the best platforms have the most active users with an engaging trading community. As well, they offer efficient copy trading capabilities and proper analytical analysis of how successful a trader is. Below is a list of the 5 most popular social trading brokers.

  • Trade360
  • eToro
  • CMS Trader
  • ZuluTrade
  • FxPro SuperTrader

Conclusion

There you have it, a comprehensive overview of social trading and everything it has too offer. The evolution of trading and social networking has led to the innovative trading platforms that is social trading. It has so much too offer and is a true spectacle of modern trading technologies. The level of transparency, communicative aspect, and copy trading features are what set social trading apart from all other platforms. With careful insight and knowledgeable use of social trading, as an investor there is much potential to further your skills, or sit back and create passive income. Below you’ll find the list of the very best social trading platforms.

What is Social Trading?

Social trading is a new way for retail traders and investors to get their start. It is based on the idea that the collective talent of hundreds of more experienced traders is better than the talent of a single trader. A social trading network connects traders worldwide, enabling them to share their insight on what’s happening in the markets – as well as what they are trading – in real-time.

The first social networks of traders were based on online information and the sharing of ideas between traders. Today, these networks don’t just feature the social aspect, they also provide automated trading. In other words, not only do these networks allow you to view, analyse and comment on the performances of real traders in real time, they also let you automatically copy their transactions. You can use this “social” information to make your own trades or you can decide to follow – and automatically copy – one or more traders in the social network (this is known as mirror trading).

A minority of traders manage to make a living on the forex market and you can find them through these social trading networks. These traders can open both long and short positions (of a forex currency pair, for example) and they can make money when the price goes up or down. Your performance is therefore not dependent on the general market trend (which is the case when you buy a share on the stock market), but on the experience of those who are providing the trading signals.

However, if YOU happen to be a good trader on your own, these social networks provide you with access to additional income through the sharing of your trades. The better your performance, the more investors will follow you, and the more commissions you will earn.

The following articles will guide you through the social trading landscape.

WARNING: social trading social involves the risk of losing money. Don’t get involved in social trading if you have financial difficulties, the idea is to only invest money that you can afford to lose.

Here are a few articles to learn about and understand the various aspects of social trading and mirror trading.

ZuluTrade is a social network for forex traders that allows you to “connect” with thousands of traders (referred to as signal providers) worldwide. The ZuluTrade social network allows you to select signal providers in order to automatically copy their trading transactions to your account – while giving you the option to set your risk limits.

eToro aims to make the forex market accessible to all traders and it does this by providing an easy method to use social trading (OpenBook). eToro is both a social investment network and a broker, traders can manage everything via their unique interface.

Launched in 2020, MQL5 is an online trading signal service that enables you to automatically copy the transactions of professional traders. This service is available on all MetaTrader trading software terminals.

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