What Is The Process Of Social Trading?
Social trading, often known as copy trading, is a type of investment that automatically allows ordinary (non-professional) investors to follow and imitate expert investors and traders. You don't need to be an expert on the subject. It is also free of charge/fees, but you must carefully select who you will be copying and ensure that it meets your objectives and goals, risk tolerance, and time horizon. This article will define social trading and show you how to get started.
What is social trading?
We may seek social trading in the same way we would look for a social network, such as Facebook, Linked In, Instagram, Pinterest, or Twitter. The difference is that you are trading in financial markets, and you can also observe other people’s track records. However, the interaction is essentially the same as in other social networks; you have your feed where you can view other people’s postings about markets, questions, surveys, and so on.
Some social trading platforms make it simple to locate successful investors whose trading approach matches your requirements. However, this is not always easy because finding the proper investors to emulate might take time and expertise.
With social trading, you get a more in-depth look at what you’re investing in. You have access to the investors’ historical returns (which are not predictive of future results), risk score, drawdowns, holding period, and even current holdings, so everything is clear to those who wish to start copying.
How does social trading work?
Social trading operates like a well-oiled system, with brokers, platforms, inexperienced traders, and experts playing vital roles.
A platform for social trading
It’s a professional network that acts as a link between novice and experienced traders in trading and a forum for conversation and information sharing. It frequently resembles a typical social network, with capabilities such as publishing information, commenting, postings and sending messages.
Traders who are professionals
Traders who are professionals assign roles as signal providers. They trade on their accounts, allowing inexperienced traders to replicate their moves. They can even have their professional blog on various sites.
Investors and novice traders
Investors and novice traders are the platforms’ primary users. They can duplicate the trades of experts, communicate with and copy signals from skilled traders, and do so on their accounts at the agreed ratio.
Brokers ensure order execution and access to copying instruments. They benefit from increased trading activity and the acquisition of new customers. Some brokers, such as eToro, FXTM, and RoboForex, have their social trading platforms, while the vast majority rely on third-party suppliers.
Provider of social trading platforms
Is a provider of social trading software, a platform that brings together clients from several brokers in one location. MQL5, ZuluTrade, and DupliTrade are the most popular suppliers.
Is it safe to engage in social trading?
A lot is dependent on the broker and platform you’ve chosen. Consider platforms with the regulation in one of the nations with an established legal system (for example, the United Kingdom, Cyprus, Australia, and the United States) and transparent statistics for study.
Social trading on Forex from the world’s leading brokers is risk-free, and the main dangers, in general, are in the trade itself. However, as the popularity of the service grows, scam brokers may also provide copy trading. Scam brokers are often unregulated, do not explain the dangers, and exaggerate the possible reward.