What Is Social Trading?
A newbie like you will want to know what is social trading and how you can earn from it?
Social trading is the fastest growing trends in the markets. It is the easiest way to access the financial markets.
You are about to find out all the necessary things in this article. We have gathered many important factors for new traders and intermediate traders, who are little or not at all aware of this kind of trading. It is an independent form of trading.
There are many factors to be considered before you can involve in it. So, sit tight and explore the article with us.
What Is Social Trading
Social trading is a new way to enter into the financial market. The word ‘’Social” means an informal gathering, especially by the members of a particular club or group.
The word “trading” means to exchange something for something else, typically buy and sell goods and services.
Thousands of traders trade combinedly rather than trading by one trader. The trading platform looks like other social media platforms like facebook, twitter, etc.
However, the social trading platform is only for sharing all financial ideas, news, trading strategies, and so on.
As per the history, the first social trading was famous only for sharing trading knowledge and ideas among traders.
Just to have the opportunity of trading easier and manageable for beginners, social trading can be the best choice.
The only thing is to choose the right expert trader to follow and copy.
This kind of trading helps people to trade online and turn new trader into an expert trader within a short period of time.
For its unique trading benefits, a lot of people prefer social trading as their first choice.
Anyone can join the social trading platform including new traders, experienced, and other types of traders.
How Social Trading Works
The social trading platform is famous for its unique trading benefits which we have mentioned earlier.
You can share your thoughts and knowledge regarding trading via the social trading platform.
Moreover, it is easy to receive trading signals from signal providers. You can also make money by copying other profitable strategies.
By opening an account in a social trading platform can be the first step to know how it works.
There are two types of accounts in the networks. One is a demo account, and another is a real account.
For beginners, we recommend starting with a demo account because it will be easier for them to grasp the basic knowledge of social trading.
A demo account is like a real account. The only difference is that people can trade with virtual money in a demo account and trade with real money in a real account.
Investors and traders can interact in the demo account too. They can even see every movement of the markets.
The platforms keep up to date about all the trading sessions like a real account.
Followers are also able to see the top traders with portfolio, track record, strategies, techniques and in what instrument they are trading.
Additionally, they can see the trader’s average risk and profit ratio and how much they have made and what their trading niche/asset is.
The networks have enabled the traders to automate their trading through allocating some of their funds to copy another trader’s activity and movement in real time.
Finally, choose the right trader to follow and copy his/her trades.
Invention Of Social Trading
Before coming to this social trading idea, people there was email communication. So, you can consider emails as an evolutionary history of social trading.
After emails, there was Mirror trading and Copy trading.
In that time, there were some traders who used to communicate with their followers through newsletters.
At certain levels, traders mainly open and close their trade after getting an e-mail.
An e-mail was sent to all other members whenever they wanted to open a position.
Finally, the trading room has appeared.
Instead of sending e-mails, traders communicated with each other via trading rooms.
On the other hand, traders wrote in the virtual rooms so that, other followers can read and copy.
Afterward, the evolution of the chatroom helped traders to communicate with each other through commenting and asking questions.
However, people need to sit in front of the trading device for a long time. Not only that but also, they have to pay fees for this service.
After analyzing the whole situation, an automated trading idea came through some people.
The idea was that an automated trading system will copy other trader’s trade in one platform without monitoring the emails or trading rooms for the whole day.
In 2005, Tradency has introduced the first Mirror Trader. It is an innovative trading platform that offered the unique concept of mirror trading.
In Tradency, a trader would host his own strategy. He could also provide a long record with performance.
If the strategy is accepted, the other traders could look on it.
If interested, they could mirror or copy the strategy on their account with all transaction.
The other social trading platform like ZuluTrade and Etoro came up with a new idea where traders did not have to submit their strategies and get approved to be used.
They were able to communicate with each other and would stay connected to the whole copy trading system.
However, social trading is still improving and trying to deliver the best thing to traders.
Advantages Of Social Trading
Social trading is popular because of its unique advantages.
A community, where people meet and share their knowledge with other traders. By coping a profitable trading strategy, traders can earn a handsome amount.
Not only for the best-earning source but also, for other benefits social trading is growing very fast.
Here is a list of benefits of social trading for beginners.
Learning While Earning
Traders can earn additional income from the networks by sharing their strategies and techniques. It is easy to earn money while learning to trade
Good Source For Learning
Social trading platforms is a good source of learning on trading. You can speed up your knowledge by implementing them into real-life trading.
Passive Income for Copiers
New traders can follow and copy other successful traders and earn a passive income.
It is possible to copy other traders when the market is open. You can copy another traders strategy or trading action in real-time.
Extra Charge or Commission
It is beneficial for all the traders because the social trading platform does not charge any kind of extra fees or commissions for trading.
This form of trading saves time easily. It does not take much time like traditional trading, where you must wait for the whole day and observe the trading sessions. In social trading platforms; trading is performed within a short time.
The social trading interface is almost similar to the social platform. This kind of social interface is easy to maintain. They can get everything in one place.
International Market Access
It allows every trader to get access to international markets easily. It also enables users to gain knowledge about international markets, commodities, and indices price difference.
You can get access to the trading platform from anywhere and anytime. It is not mandatory to sit in one place for performing trade. They can easily maintain their trading from distant places and distant times.
Be A Professional Trader
Improve your trading skills with the help of social trading. People invest more money to be a skilled trader. The platform will give you an opportunity to learn from different expert traders.
Disadvantages Of Social Trading
Like everything else, social trading also has some disadvantages.
Since all the people all over the world are gathering in one platform and sharing their knowledge.
For that reason, no one knows whether those strategies or methods are true or not.
By implementing a proper trading strategy, only a few get to succeed in trading.
You can lose money by following the wrong trader. So, it is wise to judge before copying a trader.
However, the hardest thing is to choose the right trader.
You will fail to earn money if you choose the wrong trader. On the other hand, it is necessary for traders to avoid scammers.
We have placed the best platform for you in best social trading platforms and social trading networks.
There are so many platforms and networks that provide the service of social trading.
Another disadvantage is to choose the right trading platform.
Traders who are new in this field, often get confused with the trading platform.
Some platforms even offer rewards in return for joining them but in most cases, these platforms will not guide you for risk management.
Moreover, social trading makes traders lazy. They try to avoid analyzing the financial market after trading in the social platform.
Why Social Trading?
The easiest way of earning money is social trading. Anyone can make a passive income through it.
There are so many reasons for newbie and intermediate traders to get involved in this kind of trading.
The following reasons will give you a clear overview of why social trading.
- From social trading, people can earn a profit. You don’t need to spend the full time in front of your device to analyze the trading market. It will give you the way to communicate with other expert traders.
- New and intermediate traders can learn from the expert traders about the trading systems, strategies, methods, etc.
- You can perform your trade from anywhere and anytime.
- Since it is a transparent field, everyone can see each other’s profile and the details of the trader.
- Social trading is a social interface, which also provides a community; talk to each other related to trading.
The social trading platform offers a minimum investment.
People all over the world can conduct trading socially because it does not charge any fees or commission.
Things To Do Before Social Trading
Through a social trading platform, traders can interact with one another. However, the trading process is simple; but, it requires minimum knowledge of the financial markets.
Moreover, you need to keep a few things on your mind before starting social trading.
Will you trade, copy or be copied?
There are three types of categories where you can place yourself.
- Will you trade socially?
Trade socially means you want to trade on your own using the information from other people.
Basically, you will be using real-time views and sentiments to make your trading decisions.
- Copy other traders?
Copy other traders work for those traders who don’t have enough time to analyze the market.
Coping with other traders trade, you can easily earn money without trading by yourself.
- Be copied?
Another way to earn money by sharing trading signals on the platform.
You can share your trading signals after becoming a proficient and successful trader.
From the above categories, you can go step by step to make your trading comfortable.
Can You Afford?
You can’t make money without having a minimum knowledge of trading.
Remember, never invest money which you cannot afford to lose.
You can start social trading, either using a demo account or investing with a small amount.
Invest your time and knowledge to be an expert trader.
Do you have patience?
If you think you are impatient, then don’t start. In trading, it is necessary to have patience.
Invest your time to educate yourself for being a successful trader.
It is wise to avoid new and unverified users. However, it doesn’t mean all new traders are bad.
But, it is better to take prevention.
Find a better social trading network which is the best suits for you. For selecting a platform it is necessary to keep a few things in mind:
- Are they providing a demo account or not?
- What is the minimum investment amount?
- Trading application available or not
- Is there any risk management or not?
Trading bears high risk, no matter how good you are in this field. For that reason, experts always suggest traders not to stop learning.
Risk management is an important matter in social trading. It helps you to determine the trading time.
It also gives you an idea if it a good time to copy a certain trader, or not.
It is proven that, if you have good knowledge of risk management then, you will never enter trades with a high-risk factor.
Good risk management is known as the heart of responsible trading.
Social Trading Tips
After opening an account, you can follow these tips for your trading sessions.
- If you want you can copy one successful trader or spread your money among several. However, it depends on you. See the risk level along with the track record of the traders, before you make your decision and before choosing a strategy.
- If you are interested in short-term investments, then go for the day-traders. And, if you are interested in long-term investments then go for the traders who keep their positions open for a week or even months.
- Try to stay up to date with the investors you are following. Find out the logic behind their decisions and don’t hesitate to ask questions.
- Use virtual money to try different strategies, risk levels, and try to sharpen your trading skills.
Mirror trading allows investors and traders to copy strategies from successful and expert traders.
A trader can select a strategy from potentials which will help them to achieve their goals.
They can select strategies according to their personal perspectives, like risk level and past profits.
The major advantage of mirror trading is that it will remove your trading stress. Mirror trading is especially helpful for new investors.
However, there are some limitations to mirror trading, which we will discuss in our next article.
Mirror trading can help investors by preventing themselves from any emotional trading decisions.
Traders can diversify their trading risk, by trading more than one strategy concurrently.
Social Trading vs. Copy Trading
Social trading is broader than copy trading. It is a more effective way of trading for someone who has started learning the financial market.
In another way it is like an indicator to make an independent decision.
Copy trading is for those people who don’t have the time to learn to trade or don’t feel they can be successful.
You can think of it as an easy form of investing without going through the hassle of analyzing the markets.
You can also read the difference between social trading and copy trading.
In conclusion, after going through this article a new and intermediate trader can perform social trading with ease by knowing what risk he/she is taking.
We hope that you have gained the basic knowledge of the aspects of social trading.
This article will help new traders to start trading after learning all the important features, pros, and cons.
We will keep updating after researching and analyzing any new stuff on social trading for your benefit.