Brief Introduction To Social Trading
This article provides an in depth look in too the world of social trading, and how you as an investor can delve into this lucrative investment practice. We have conducted informative research into what social trading entails and why it has become so popular in recent years. You will discover the advantages social trading has too offer, and how it can be truly beneficial to a variety of traders of different experience levels. We also look in too the disadvantages social trading might have, and how to trade successfully on these platforms with the knowledge of risks involved. Discover the leading social trading brokers in the industry, and become informed on everything there is to know about social trading. By the end of this article, you will have been provided with everything you need to start trading successfully on social trading networks.
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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 a 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. As well, not only can you learn from all this, but many trading platforms allow you to copy a trader’s every move 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 does Social Trading work?
Social trading networks work in much the same way as regular social networks do. Except for you are not sharing selfies and pictures of your food, you share strategies, insights and trends. You don’t watch silly videos or “creep” friends and strangers… You watch the latest market trends and related new. As well, you follow successful investors and learn from their investment methods.
You see, there are many similarities between social trading and networks like Facebook. Although the big difference between the two, is that social trading is a method of exchanging and learning information regarding investing strategies and the markets in which you trade. In essence, social trading is possible from the free flow of information and communication between fellow investors and traders.
Logistics of Social Trading.
To delve into the logistics of how social trading works, we must look in to the aspects of who is involved and what role they play. The foundation of social trading is established by the users of the social trading platform. These users fall into two types of categories; ‘signal providers’, being investors who actively trade on the platform and participate in the social aspect of social trading. And ‘followers’, being the investors who learn from and possibly copy the moves of other traders (the signal providers).
Signal providers are generally competent investors in which their followers watch and copy their trades. They are compensated for providing their services to others through various methods, depending on the platform. Some compensation methods include; a fixed monthly fee, or a small percentage of a follower’s profit.
Many social trading platforms allow anyone to be signal providers, this is made possible by being completely transparent allowing traders to see the top traders by analysing their trade history, risk level, what they trade, how often they trade, profits, maximum drawdowns and so much more. As well, signal providers can also copy other traders thus being followers as well.
Some social trading platforms may have different rules pertaining to these things, but this is generally how it works.
Advantages & Disadvantage of Social Trading
Social trading is such an attractive method of investing. With all the transparent information between successful traders- their strategies, insights, and everything out in the open, how could you go wrong? Well, while social trading can be a very profitable and a viable solution for an inexperienced trader looking to break into investing, there are also some disadvantages to trading on platforms like these. Just as there is on any other type of trading platform. See below our complete list of the advantages and disadvantages 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 on 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.
- 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
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.
- CMS Trader
- FxPro SuperTrader
This article has attempted to provide a great deal of insight into the process of social trading, how it works, the possibilities it provides, and how you as an investor can take advantage of such a lucrative investment platform. We have provided 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. So, now that you have learnt all the aspects of social trading and how it works, you are ready to delve in yourself and start networking, learning, and trading on one of the highly lucrative social trading platforms.