Due to the COVID-19 Pandemic, a lot of potential traders have put off trading whether it is in stock, crypto or CFD. This is mainly attributed to the uncertainty that has been in the air for quite some time. This however, became a market opportunity for some and had flooded a huge amount of advancement in the different financial marketing trading industry. Given that, there has been a development of new social organizations and networks that has increased in trend, which is social trading platforms. But what is social trading exactly and how does this work in general? Let’s look into some of the basic and important details about it.
Social Trading? What Is it?
In essence, Social trading is a type of investing of traders that allows them to observe the common trading behavior of friends, colleagues, and even expert traders in their respective financial markets. As much as most traders are usually operating under their own technical analysis, it has become very prevalent for others to start trading according to some expert trader, vlogger,s and even friends’ style or behavior. The main goal, whether you do this on CFD or other platforms, is to follow the strategies of these colleagues or experts by doing mirror trading or copy trading. Social trading is done mostly in a social network kind of setting that enables most traders and their associates/networks to look at each other’s trading systems and behavior and even decision-making process.
How Does it Work?
This type of trading works by being able to have quick access to experienced traders, empowering apprentices and financial markets that is able to share their strategies, and enables others to duplicate one’s behavior in trading. Most developed and innovative platforms made it even simpler for others to be able to operate as social traders. You may start doing social trading by either using a social trading platform or be able to apply the other aspects of the practice in a different medium. One common practice by traders is their ability to use an incorporated social trading platform that encourages the sharing of strategies just by using a mirror or copy trading system. In such a platform, a trader may be able to follow or subscribe to another trader’s account or channel so that they are informed about the trader’s position and other forms of movements during a live feed. While doing this, the trader may have an option to copy or duplicate the person’s trade, and the system will be able to execute the same trade as the person they are following. A lot of veteran traders are able to share their status, progress, and most importantly, techniques to those following them on the platform. This, thanks to the progress of technology, has become one of the most popular processes for traders online as most are able to follow the progress of real-life experts and are able to duplicate their strategies to see its efficacy in their own exchanges.
What you Need to Know Before Starting with Social Trading
We do have to understand the fact that not everybody is going to be able to do social trading. A lot of traders whether novice or experts have diminished the information that is mostly expected in negotiating in the financial markets. One of the downsides of social trading is that it enables some traders to think that the risk factor in traders are gone when doing social trading or to an extent, feels a bit “foolproof” when in reality, the risks included in trading have not even disappeared at all. Whether a trader likes it or not, they are still bound to make losses at a certain point in their trading career regardless of when one follows mirroring or copy trading. Being able to confide in another person’s judgment while being in a situation of risk in trading becomes a situation for much attention when social trading is applied.
Information and consistency is very important in Financial Markets and being able to look into social trading can be a massive help to your analytics by applying those of the experts with much consideration of risk management strategies applied to your system. Social trading is all about being able to take another trader’s plan and taking them on in the market. However, these can also be a point where you are able to apply these techniques according to your objectives but must be fully realized that this originally is more applicable to that of who you have subscribed to in the platform. But that should not be left as is and should be adjusted according to your own objectives and inspirations.