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Trading Lessons

Social Trading – Different types and Styles

Interest-Rates / Learn to Trade Dec 22, 2016 - 03:34 PM GMT

By: Submissions


Trading based on collective wisdom of a network of traders is the up and coming way to trade.  Social Trading allows one big network of traders to use each other’s wisdom and experience to trade in a new way.  Connecting traders to one another enhances everyone’s trading

A social trading network is a website that enables traders to share their trades with other traders.  They often offer a community and an option to automatically copy the trades of others.  This is also called mirroring trades.

The Benefits:

At its most basic, Social trading networks bring you live feeds of trading action.  This enables you to see what others are doing, what they are profiting from and how they are doing it. Watching others is a great way to get new ideas, understand trends and adopt new strategies.

Social trading networks offer the option to follow specific traders.  If you see a trader whose style and mindset seem to be consistent with your own, you can follow them and learn from both their successes and mistakes.  You can also follow someone based on their profits and learn to change your mindset and trading style to mimic theirs. You can reach out to these traders personally and develop a relationship that is mutually beneficial.

Social trading can lower the learning curve for Forex Trading tremendously.  It takes much less time to learn by watching others than it does to research, read, practice and study the ins and outs of trading.  This is not to say you should follow others blindly without understanding what they are doing. 

The Negatives:
The main objective of Social Trading is usually to copy those traders that you determine are successful and trade in a way that you are comfortable with.  Sometimes people follow without really being aware of the trader’s strategy.  What is more common currently is that people just follow the herd.  This is dangerous.  Just because someone has a lot of people following and copying their trades does not make them the right match for everyone.

It is very important to realize there is very little of a vetting process on most  social trading sites and the boasting the site does is misleading.  A site can very simply and truthfully say our top 5 traders made a huge profit yesterday, but those same traders might be the biggest losers tomorrow.

Check the customer service policy of any social trading network before you start trading on their platform.  Of the most common Social Trading sites, only one of them has live chat customer service.  Traditional Brokerages usually have 24 hour hotlines to call for help. 

Remember, the Social Trading company makes money based on the amount people invest and trade through their websites.  It is in their best interest to entice you by showing you the successes of many of their traders, and that can change everyday.  Beware of falling into this trap and immediately following some of the top traders of today.  Watch and learn about the  habits of any trader over time before mirroring their trades.

This is an paid advertorial. This is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any investing and trading activities.

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