As someone who is just new to trading, social trading to be more specific, you are probably loaded with a lot of questions waiting for answers. You might want to avoid losing anything as much as possible which makes it necessary for you to find out everything related.
Social trading entails a lot of things, it is very far from a one-night affair. It is a day to day affair for every trader using it. In order to help you cope up with it, here is a comprehensive guide specially made for you.
What is social trading?
Social trading is an avenue for traders to share and learn information among them. Traders are enabled to learn and earn at the same time, in as much as they are enabled to copy what successful or professional traders do.
Social trading offer clients transparency, especially with trading techniques and information which they can maximize for better output and performance. Traders base their investment decisions in accordance to the information that has been shared in the platform.
Furthermore, social trading allows traders to follow and interact with other traders via instant message or Facebook wall.
All in all, social trading is about the free flow of information for every trader to learn and use.
How Does Social Trading Works?
In order for a trader to have an access to social trading, he must first have a trading account with a particular broker. After opening a trading account, the trader is qualified to join a social trading network.
The social trading network works just like social media, but the difference is that personal information, photos and such are not posted in social trading networks. Instead, related and useful information is shared within the platform.
With social trading, there are signal providers which provide the signal to traders, and in return, they are compensated by providing such service. The compensation can be through a spread volume of assets under management, fixed monthly fee or a percentage of the profit of their follower.
Benefits of Social Trading
- Learning While Earning – With social trading, traders can learn while they earn. Traders, be it a beginner or a professional, are given access to a wide variety of information and is even allowed to copy the trading strategies of successful traders, thus they are earning and learning at the same time.
- Quick Grasp of the Trading Market – The duration and cost of becoming a professional trader are reduced due to the free flow of information. It also allows traders to learn and interact with fellow traders, thus they are given an avenue to get quick and efficient information.
- The Trader is Not Alone – With social trading, traders are not alone as they work and collaborate with other traders who share the same goal with him. The interaction between and among traders leaves no one alone, as long as the trader interacts with other traders.
- Great Management Tool – Social Trading diversify the strategies whether the trader is trading on his own or not. This means that when the market is not doing well with the strategy that you used, this will still have a positive impact on your equity curve and drawdown.
Precautions to be taken in Social Trading
- Social trading is easy, yes it can be easy if done the right way and with the right trading platform. You might think that this is an advantage, but its easy nature can also be a disadvantage. A trader can copy the trading technique of a successful or professional trader, thus he is no longer learning the true essence of trading. The trader will solely depend on what he has on the platform which means that there is no deeper learning aside from the information present in the platform.
- Social trading is constantly changing and getting popular by the day which makes it hard for a trader to choose the right social trading platform alongside the wide array of the social platform he can choose from. It can’t be avoided that there are scammers lurking in the corner, thus there is a risk that a trader might go for the wrong platform
Social trading is a not so old concept that it is slowly dominating and relatively changing the trading industry. Its concept is definitely of great help, especially for beginner traders. It provides an avenue for traders to learn, earn and interact with each other at the same time, thus they help each other to improve in the industry.