Social trading has risen greatly in popularity in recent years. This is thanks to the availability of many top social trading brokers and platforms like Etoro and others, combined with an increasing desire for social interaction online.
Here I will examine exactly what social trading is, how to get started in social trading, and some of the ways in which it could benefit your Forex trading future.
Therefore, let’s dive right in…
Here are the deets…
The Basics of Social TradingSocial trading is a type of trading that effectively allows traders to copy the market movements of other traders. In this way, social trading can be exactly the same as copy trading.
What makes social trading unique and different from copy trading, is the added element of social interaction. Thinking of social trading like copy trading combined with social media will get you close to an accurate picture of what social trading is.
Through social trading broker and platform, you will typically have the power not only to copy the trades of others but also to interact with those traders and others through the platform.
This adds an extra dynamic layer to the trading process which is your ability to communicate with other traders while you trade.
How Social Trading Works
The basic principles of social trading are that a broker will provide you with a trading platform that fully incorporates a range of features.
These features include the ability to engage in copy trading of others on the platform and also integrate social network-style features.
This means you can follow other traders, post comments, messages, and share your opinions through the network.
On the trading side, this still functions much as a copy trading platform. You will typically choose the trader you wish to copy, and you can do so at your own convenience.
The added element here is the ability to interact with others. This enables you to get a broader insight from others on a particular trader, or strategy you wish to follow.
The best example of a fully integrated social trading platform is
FP Markets. They are often referred to as both the number one copy and social trading platform in the world. This highlights the great degree of similarity between the two styles.
If you do not want to engage with a fully equipped social trading platform though, there are other ways in which you can start social trading through MT4 or another trading platform.
This requires more work on your behalf as you will have to separately collect and follow the data, but it is possible.
Metatrader 4 for example, has a feature known as “sentiment trader” which enables you to analyze market sentiment and how others have traded.
Aside from this, you can also choose to follow Forex trading signals, the information you collect from other trading communities, or data from one of many market sentiment indicators that are readily available.
As a new trader though, it is often much easier to sign-up with a user-friendly, fully integrated, social trading broker.
Getting Started in Social TradingGetting started in social trading is not a difficult process, though first, you will need to choose which type of social trading you would prefer to be involved in.
If this is a fully integrated social trading broker experience, then you can quickly find a top social trading broker and complete the sign-up process with them to start trading.
You could also opt to start trading with a third-party trading platform. Many of these third-party platforms can be linked to your original broker account to allow for social trading, though you should double-check with your broker first.
Finally, if you are a more experienced trader, you may wish to “build your own” social trading experience. With the support of a top broker, that is also possible.
Here you can join trading community groups like MQL4 if you are a Metatrader user. You can also gather data from charting indicators like the COT report, or Volatility Index (VIX), to help you decide your strategy.
You could also decide to sign up for a separate signals service which you can follow on your own.
Pros and Cons of Social TradingJust like any form of trading, there are good and bad points with social trading depending on your needs. Here are a few of the key points to note:
ProsSocial trading can be great for those who are new to trading. It can be a way for beginner traders to receive great guidance and information from more experienced traders.
You can get all the benefits of copy trading, with the added interaction with other users. This is something many feels adds value and a sense of community to trading.
Social trading can be a great time saver. Find a trader you like to follow and copy, and you remove a lot of the time it takes to research and places your trades.
ConsJust because you are following the trades of others does not mean you shouldn’t do your own research and due diligence. This is still key no matter your trading style.
Following the trades of others even though they are likely experienced traders, exposes you to risk which can be somewhat out of your control. To this end, it is important to research any traders you want to follow and copy thoroughly.
Social trading allows everyone to share their opinions whether they are well-informed or not. It is up to you to decide which advice you should follow.
Final ThoughtsSocial trading, whether it is through a well-established social trading broker and platform, or through a range of services provided by third parties that you combine by yourself, is a great way to enhance your trading environment.
It can provide you with opinions, ideas, and data you never previously considered as well as streamlining the entire trading process for many.
As long as you engage in the correct research, and remember to employ prudent risk management, there is no reason why social trading cannot work to your benefit in trading forex, CFDs, or other assets.
Also read:
Compare The Two Common Trading Accounts — Demo Vs. Live Trading
