Social trading has become very popular over the past few years. It is an approach that enables you to access financial markets by giving traders the ability to replicate the positions of others, as well as interact with their peers. Below, we will reveal everything you need to know about social trading and how it works.
What is social trading?
Social trading is a type of dealing that provides investors or traders with the ability to copy and execute the strategies of their peers – typically more experienced traders with a proven track record. While a lot of traders will carry out their own technical and fundamental analysis, there are some traders that would rather observe the analysis of others and replicate what they do.
Social trading is often considered a form of a social network, as the function provides traders with the capacity to interact with one and other, watch other’s trades, and learn about the decision-making process.
How does social trading work?
Social trading works by generating quick access to monetary markets, allowing for both experienced and novice traders to copy each other’s trades and share access with one and other. In fact, advanced platforms and new technology has made it much easier than it ever has been to become a social trader. You can decide to either utilize a comprehensive social trading platform or you can take on some elements of the practice.
There are some traders who may wish to utilize a social trading platform that is fully integrated, which means the complete sharing of trading strategies is facilitated using a ‘mirror trading’ or ‘copy trading’ feature. As with a social networking platform, a social trader may decide to subscribe to the channel of a trader they like, whose positions would then be broadcasted on a live feed, giving them the option to copy this individual’s deals should they wish to do so.
You may be wondering why someone would want to share their strategies in the first place. There are incentives for them to do so. The trader who shares their secrets tends to be rewarded with status and money. Typically, there is a leader board on social trading networks that lists traders based on their success rate and popularity.
There are some traders who prefer to simply use the principles of social trading, but they will maintain control over their trades by utilizing a number of different indicators and signals. By looking at the activity of other traders and the market sentiment, social trading can act as confirmation of different types of analysis.
So there you have it: everything that you need to know about social trading. We hope that this has given you a good understanding of how this form of trading works and why it has become so popular as of late. Of course, the key to getting social trading right is to make sure that you follow the right traders. Take the time to source traders with good records to back them up.