Social Trading offers new tools to almost everyone in the investment ecosystem. This is a short guide that explains what Social Trading is, and what it can do for you.
Digital technology has totally changed the face world and pushed the popularity of the term: “Social” much higher. Today, social platforms are in every aspect of life, from social networks to social media and other social platforms. Following the same trend, Social Trading has been created, and it presents a new way to both learn and trade.
With Social Trading, almost anyone can enter the market. Even people with basic knowledge of money and markets can jump on a social trading platform, and start increasing their knowledge of how to trade. In simple terms, social trading allows people to learn, while they are also trading markets.
Social Trading (so-called copy trading or social investing) allows investors to share detailed portfolios and strategies with other traders. This is very similar to other social sites, where people can come together, and explore common interests.
After you join a Social Trading platform, you are generally free to search and follow other traders whose trades can be selected for your duplication. You can also become a leader by making great trades over time, and attracting people on the platform.
All participants will run their portfolios on the Social Trading platform, which provides a powerful system and support tools so traders can keep on top of their own investments. To make it simple, there are three parties in a Social Trading equation: a follower, a leader, and the trading platform itself (represented by brokers).
Follower: You may be a beginner and not have a great understanding of the markets. You also may be lacking in practical trading experience. In that case, the best plan is to find some professionals and copy their trading strategies.
With Social Trading, you are allowed various methods to emulate profitable investors, either by electing to follow successful ones who have a great record or by picking biggest gainers in recent times.
As long as you are able to select a leader with reliable performance, just imitating what they do not only frees you from the time involved with trading but also encourages an optimistic outcome. Moreover, it’s completely up to you to choose who to follow, or what trade to copy. Aside from the investment strategies you choose to copy, you still have full control over your account and money.
Leader: Obviously, like any normal investor who has experience, leaders put their money into the market and earn profits by utilizing advanced trading strategies, market analysis, and prediction.
Why would they publish their work for others to copy?
Leaders can get rewards from brokers (or social trading platforms) based on how many people follow and open trades after them. Leaders can gain better trading conditions or real cash as commissions, so that’s the motivation for leaders.
The platforms themselves have more potential to attract clients and achieve higher numbers of account registrations as well as commissions from transactions. The more trades are placed through Social trading platforms, the more income from trading fees a broker will gain. Accordingly, several social trading platforms even offer free accounts to attract more members.
It’s not a coincidence that Social Trading has become popular, many people want to trade, and Social Trading makes the process of learning much easier. Sooner or later, you’ll recognize the immense opportunities it offers compared with existing brokers who only offer one source of market intelligence.
Distinguished from other investments, everything you know about the person who gives you trading advice may only come from word of mouth or advertisements. You are not sure whether those pieces of information are trustworthy or accurate, and have no way to confirm a source's reliability.
Social Trading provides all data and statistics for a trader, including current positions, historic trading records, and other info that will help you to learn more about what they can do in terms of producing returns.
Integrity is a top priority because Social Trading platforms offer their best to affirm the attractiveness and safety of investments when they build a site. Information is the most powerful tool anyone has when it comes to building trust, and Social Trading platforms do this well.
A great feature of Social Trading is that small investors don't have to ask advice or hire somebody else to manage their accounts. Every step is overseen by the investor, from selecting leaders to follow to picking trades to duplicate.
You can switch from one leader to another, or simultaneously choose multiple traders to copy. Apart from being a simulation of a leader’s trade, you have the ability to modify all the parameters at will or close a deal if you like.
Most Social trading platforms deliver inclusive features that enable a user to have total control over their trades, even if they are copying a leader. For instance, you can check all of your trading records, create your own commands, and stop running trades.
When you are using a Social Trading platform, you don’t have to give money to anyone, which means your capital is kept secure in your account (assuming the trades go well). There is no need to worry about anyone mishandling your funds, as is often the case with money managers that also act as custodians.
Most new traders don't make money. Undoubtedly, the learning curve is one of the reasons for this, as new traders lack either essential skills or real-world experience. Without the help of a veteran trader, it is very difficult to trade successfully.
Instead of waiting to enter the market, or giving up entirely, Social Trading allows new traders to flatten the learning curve, and start making money right away. Experienced traders will help new traders learn more about how to trade, and also allow them to make the exact same trades.
Of course, there is always risk in the markets. Experienced traders still take losses, but they also understand how to limit risks. All this could lead to much higher profits and a culture of learning on the Social Trading platform.
Social trading is a product of technological advancements. It helps drop the required capital for investments, and also helps the entire trading process to be more efficient.
In a world where bank deposits only yield 1% per year, it is vital that people find new ways to create returns on their money. Social trading can help people to take on more risk in a sensible way, and boost their annual returns.
Besides, many Social trading platforms attract account holders by applying a very small fee (or completely free of charge) for registration and copy trading. Trading platforms offer flexible trading hours, which means investors don't need to spend loads of money on a high-speed connection or be at their computer at peak trading hours.
Basically, Social trading isn’t restricted to any type of investor. There are a couple of typical groups with different goals that use these platforms.
Here are some of the people who can get a lot out of Social Trading:
New Traders: Inexperienced people or people who are starting off with a low budget can get a lot out of following professionals. Social Trading allows new traders to start off on the right foot, and avoid costly mistakes early on.
Apprentice Investors: Some people have the desire to establish their own careers in investment and trading. Following top Social traders to accumulate experience and practice could be a great idea.
Pro Investors: People who have a lot of experience in the markets may be able to expand their renown by using Social Trading platforms, and also earn a higher income. In addition to personal rewards, pros will be helping people who really need it, which always feels great!
Whether you are a follower, an apprentice, or leader, Social Trading is waiting for you. Just remember that there is no such thing as easy money, and no matter what, have reasonable expectations about how much profit can be gained in a given time period.