Why beginning investors benefit from social trading
Investing and trading in the financial markets can be an extremely rewarding and profitable activity, but it does come with varying degrees of risk. Generally speaking those investors that play it safe aren’t usually the ones that end up making big money: greater risk often brings bigger rewards. To make wise investment decisions you do […]
Investing and trading in the financial markets can be an extremely rewarding and profitable activity, but it does come with varying degrees of risk. Generally speaking those investors that play it safe aren’t usually the ones that end up making big money: greater risk often brings bigger rewards.
To make wise investment decisions you do need to know what you’re doing. Understanding how the markets work, developing effective trading strategies, building up an in-depth knowledge of the market and staying on top of current trends are all essential. Nerves of steel can also be required if prices start to fall dramatically at times of national or global economic instability.
Obviously learning all of that takes time. Plus, all of the theory in the world is no guarantee of being able to hold your own in the real cut and thrust of the online markets. That is where social trading comes in.
Social trading platforms are both trading sites and social networks that are focussed on the business of trading and investment. Traders can interact and discuss trades and markets, pooling their knowledge and instincts for mutual benefit. You can also observe each other’s trades in real time, seeing exactly what makes a successful investor.
The benefits for anyone new to financial trading are obvious. You can pick up tips from successful traders, hearing how to do it direct from other investors. You can sit in on strategy sessions and gain understanding of the different approaches that can be taken.
What is copy trading?
Copy trading is one of the most popular aspects of social trading. It involves following traders that have a successful strategy and copying them, trade for trade. This makes it an ideal way for new investors to begin trading in forex, stocks, cryptocurrencies or other commodities. Making copy trades of the most profitable traders is the best way to learn the ropes. You’ll be making trades and making money while picking up skills, strategies and insights that are essential for any successful trader.
Most platforms allow you to study the investments and track record of traders you might want to follow, narrowing them down according to the nature of their investments, their level of activity and other parameters that you can specify. That means you can copy those traders you most want to emulate, who are trading in commodities you are interested in or who have a level of risk tolerance that you are comfortable imitating.
It’s perfectly reasonable to stick with copy trading as a long-term strategy. But you may also learn enough to strike out on your own, and have other traders begin to follow and copy you. If that is the case then you can often earn a bonus income, as many social trading sites pay a commission to their most successful traders in return for them attracting copy traders to their platform.
Using social trading to your advantage
It’s always more effective to learn by doing. Copy trading and social trading generally is a far quicker way to find authentic trading information than searching through newspapers, books, magazines and websites, not all of which are reliable or trustworthy sources. On a social trading site, it’s easy to see if a trader knows what they’re talking about, or if a strategy is successful. Plus, you can ask them exactly what you need to know. In a way, it’s the equivalent of having a one-on-one session with a skilled financial tutor.
As you become more experienced you’ll benefit from being part of a wider investment community that can prove an invaluable support network. Collaborations, information sharing and mutual advice can all be accessed, and thanks to the wonders of the worldwide web you can easily have an international community of allies and advisors on hand at all times.
Popular social trading platforms include eToro, Spiking, Trading View, Covesting and others. All of these platforms have different advantages or disadvantages, depending on the markets you want to trade in and the methods you want to use.
If you are thinking of getting into investment trading in any form there’s no doubt that social trading is the best way to begin. Not only will you benefit from the information sharing and advice of a dedicated trading community, but by using copy trading you’ll be able to start trading and making a profit immediately, without having to spend years studying the process. Learn while you earn, and soon you too could be a successful trader that others will want to follow.