Finances & Money

How Does Social Trading Work?

online trading


Social trading is probably one of the rapidly growing trends both in the stock market and other foreign exchange markets. But despite a growing number of social trading, there are myriads of people who wonder how this trend works.

As such, inexperienced people with this system may be nervous if it is worth their efforts and time. But it’s simple. Social trading networks operate just like the conventional social networks. The only difference is that in the social trading network, people share ideas and not the usual lunch or selfie photos.

A significant feature of a social trading platform is that it gives a dealer an opportunity to check and copy trades of other successful traders.

For instance, if you get a successful dealer who has an appropriate investment style, you can choose to adopt their strategy and copy their entire open trades.

However, in social trading, you do not have to allow external access to your account or reveal any personal information to the individual you extract data from.

If you become successful as a dealer, you may earn additional income by being a signal provider as well as marketing your stratagem to other traders. And that will make you become a prosperous forex signal provider.

In essence, many people opt to undertake social trading because of its open concept and ease of joining. Moreover, people are always attracted to earning an income through copying other traders’ profitable strategy. Equally, a signal provider can quickly join and get a signal receiver.

Social trading also provides an opportunity to interact with other dealers, monitor trading outcomes of other people in addition to discussing prevailing conditions in the market.

In most social trading, signal providers receive compensation for service provision to others, and the reward can be fixed once-a-month which is spread from a volume of assets under supervision or a given proportion of their profits.

Understanding Social trading

Social trading is a provision that permits investors to ‘copy’ the operations of expert traders. All it requires is slight or minimal knowledge regarding financial markets. That means, social trading only needs a dealer to make an appropriate choice for traders to trail more especially taking into consideration the proportion of successful operations and diversification of financial instruments traded by the specialists. Ideally, experts do not dwell on a single tool but rather diversify on them.

Essentially, social trading introduces a new approach for analyzing financial information by providing a basis for comparing and copying trades, strategies, and techniques.  

Before the dawn of social trading, traders and investors depended on technical or fundamental analysis. However, after the inception of social trading, traders and investors can include social indices from data feeds of other dealers while making their decisions.

Therefore, these social trading structures may be taken as a branch of the current online social network. And as such, social trading permits dealers to trade online with the aid of others. Some traders have appealed reduced learning curve from apprentice to qualified Forex trader.

Social trading traders thus can network with others, watch them conduct trade, then copy their deals since they can learn what drove the top performer to undertake the business. And by duplicating trades, dealers can learn on the strategies that work and the ones that fail.  

The social trading approach was developed primarily as a result of the forex market and the application of MetaTrader field.

Currently, social forex trading is the widely used sector regardless of the initiation of computational fluid dynamics. Hence, we can generalize that social trading is facilitating the expansion into other derivatives instruments such as indices, commodities, interest rates, and shares.

Notably, social trading permits you with an exclusive opportunity to acquire information concerning the market from other concerned parties. Thus, you can trade in conjunction with them or use the provided statistics to undertake your trade – entirely depend on you.

In essence, social trading operates like social networking platforms such as Facebook since it connects you with family and friends at all moments.     

Why adopt Social Trading?

As a trader or investor, you can use social trading due to the following reasons;

  • Social trading is simple and straightforward: – Using social parameters for retailing assets online is spontaneous and readily available to both new and experienced users.  
  • Social trading is diverse: – Diversity is the essence of lowering risks in trade. As such, in social forex trading, you can duplicate another player’s strategy and invest it in various markets.   
  • The social trading venture is profitable: Since the launch of copy trading, 78% of all duplicated trades were closed in profit hence showing the profitability of this venture.
  • Social trading is reliable: As a result of strict regulations of social trading, more than 6 million users have adopted this approach worldwide.   
  • Social trading is transparent: Since all trader’s portfolio, track records, and risk scores are exposed in social trading all clients can make smarter decisions when evaluating who to copy.

Fundamentally, social trading embodies various tips.

Before you venture into the social trading platform, consider the following tips to ensure you succeed in your endeavor.

1. Pick a strategy

Before you participate in social trading, you should ask yourself if you will focus on a sole famous trader or haste your capital across several others. Therefore, you should consider the risk score of each dealer and trace the records before arriving at your executive decision to invest in social forex trading. To accomplish this, you can use the Copy People folio and filter outcomes according to success rates, assets classes, and risk score.

2. Pick a period

Dealers may vary in the styles they employ. Whereas some opt to be day-dealers, opening as well as closing numerous positions during that day, others may prefer to clinch their posts for a few weeks or even months. An example in CM Trading CopyKat which is a significant option for dealers who are engrossed in long-term investment.

3. Be updated in social trading

To ensure you succeed in social forex trading, follow closely the activities of the traders you want to copy and understand the logic behind their strategy. Moreover, ask questions where necessary and follow their posts.

Another vital point to consider is joining social investment network such as CMTrading account where you are awarded virtual money. You can use the cash to attempt varied strategies, outline your level of risk, and improve yours social trading expertise.

About the author

Susan Paige

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