The Concept of Social Trading

For those who have difficulty analyzing the markets, social trading is a way of escape. There is no need to study charts all day long, or even spend much time on your computer. The only initial work that needs to be done is to get the necessary things in place, pick your traders and prime your account to take on that first trade.

The first trade in the social trading network is an important one, but not for the reasons that will readily come to the minds of most people. This article will try to establish the essence of making the first trade on a social trading platform.

 

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Your First Trade: What Should It Be?

Many traders have too many unrealistic expectations of their first trade. They believe that having found a trader with astounding profitability stats, they can simply replicate that trader’s successes and start raking in the dollars, starting from the first trade. This writer has seen many of those unrealistic expectations go up in smoke. It is therefore imperative for traders who are new to social trading to capture the essence of the first trade for what it truly is.

So what should the first trade on a social trading network be all about?

  1. Proving or disproving theories about social trading. One theory that needs to be disproved quickly is that copying a successful trader always guarantees winning trades from the get-go. In theory, this may seem to be the case. But does it always hold true? Some traders find that the first trade they copy may be the first one that the Leader loses. This can be a harsh wake up call.
  2. It should be the start of a learning process. This process is all about understanding the entire nature of the social trading platform.
  3. Have you chosen the right trader to follow? Well, the first trade will not answer that question, but it is the first of a journey of a thousand miles.

 

The First Trade: What It Is Not

What should that first trade on a social trading platform not be?

  1. It should not be a time to relax.
  2. The first trade is definitely not the one to put big bucks into your pocket. Even if your first trade pays handsomely but you used too much risk to achieve this, it will come back to haunt you later.
  3. If your first trade ends up as a losing trade, then it should not be a source of despondency. Majority of life’s greatest ventures started off as missteps in the beginning.
  4. If your first trade is a winning trade, it should not be a source of undue pride or a sense of security at having found the winning formula. The road ahead is still long and convoluted.

 

Steps to Making the First Trade

There are processes that precede the first trade and these must be followed to the letter.

 

Platform selection

Select social trading platforms that have a good track record and offer robust performance stats for all traders found on the Leaderboard. This may look trivial, but it will make all the difference between success and failure. It will definitely impact that first trade. Some social trading platforms are a joke when it comes to offering performance stats for traders to be followed. A particular platform offers what it calls “probability scores”. This is just an absolute joke. In Forex trading or binary options trading, it is practically impossible to determine with any kind of probability what the next trade will turn out to be, especially when you are not in control of the trade! So why not use a platform that gives you unbiased statistics from a trader’s past performance over a one year period? At least that way, you can make informed choices and not hunch guesses.

 

Account Opening

Only open accounts with social trading platforms that work with regulated brokers. If the broker is the one offering the platform, ensure that the broker is regulated before you commit funds.

 

Account Funding

Here is a less known fact about social trading. Your level of account funding matters greatly and it will affect your outcomes. You will need to select at least two traders to follow ab initio, for the purposes of spreading your risk and also comparing performance on your portfolio. So your account needs to be funded to a level where it can accommodate trades from all traders you copy, within risk management limits.

 

1. Leader Trader Selection

Select traders using performance stats that have already been discussed in previous articles.

2. Capital Allocation

Ensure you allocate your capital appropriately. Here is how to do it. First, determine how much 5% of your capital would be. Then decide how much you will allocate to each trader you are following, within the 5% capital to be used. You also have a choice to decide to set your account to stop copying a trader if the capital allocated for use on the trades copied from that trader falls below a certain level.

When all is set, you can execute the Copy action, which will replicate all the trades of your Leader traders on your account.

 

Conclusion

Your first trade on the social trading platform does not start when you activate the copy trade function, and it also does not end when the first trade is done and dusted. In actual fact, the first trade is only concluded when the trader you are following ends the trade, either manually or by using a Take Profit (TP) function. If you are on a social trading platform, you should ideally ask the trader you are following what formed the basis of his trade entry, in-trade management as well as trade exit. The lessons learned here will start you off on a good note, irrespective of whether the first trade ended in a profit or loss. Remember, your first trade is all about learning and not earning.