Social trading is a new trend online, quickly gaining its traction in various financial markets like forex, stock and other markets. Despite, of having numerous online trading platforms, there is still a doubt about social presence and its popularity. People who are initially into social trading may be anxious at first and skeptical about the activity and its worthiness.
Social trading is a kind of investments which makes investors perceive the trading performance of their companions and traders and therefore support their investment policies online. However, social trading needs little knowledge about the financial or capital markets. This has been known as a sophisticated choice to traditional Wealth-Managers.
Social trading is a way to analyze the financial details by watching the other tradesmen performance and copying or comparing their strategies or techniques. Before the invention of social trading, people used to rely on technical or fundamental analysis to make their investment decisions.
Using social trading, the investor can integrate the investment choices, process the social indicators from the data-fields of others. Social trading Platforms can be viewed as another category of online social platforms. Such platforms like Zulutrade permits investors to trade online and follow other copy traders. Over here on the social platforms, users can interact with each and every one, watch what others are doing and then copy or duplicate the trades. On the whole, learn about the top performers, by copying or duplicating the trades. Traders learn which trades works best and doesn’t work.
Moreover, there are three main types of trades. Single or non-social trader, where the investor A bids a regular trade by herself/ himself. Second is Copy trade, in this type, trader A bids exactly the similar trade as B’s one single or non-social trade. The third type is Mirror trade where investor A automatically trades B’s every single trade. Over here A follows accurately the B’s activities.
Things to ask before starting a social trading
So, after learning about social trading, while investing ask the below questions.
Decide about the investment decisions and the type
Think about the type of social trading and working principles etc. The people who have less experience wants to absorb the information, while the one who is expert share the information on a platform. They are the investors who trade socially. Always before starting, decide what is the main reason behind investing and the impact it has on social trading platforms.
Is trading affordable?
Trading is not a magic potion, there is a risk in the money invested. Especially, when following other copy traders, there is no guarantee of being successful consistently. There is always an option of starting or investing in small amounts. Only a few platforms like Zulutrade sends the trading signals through demo account. After having enough skills in making money, try copying others. The only thing to consider is the time and knowledge.
Is there enough patience to be successful?
Whichever kind of social trading it is, there is no quick solution to become rich. Always view the results over a period regularly. There is a possibility of making mistakes and incurring losses at the initial stages. The key for this is to understand the critical functionalities of risk management and make sure to minimize the loses. The time spent on educating and trading is the consideration for a success.
Choosing the right trading platform or network
There are many social trading platforms or copy trading networks where one can join. Depending on the social profile and choices, some will be more suitable than others. ZuluTrade also provides a various list of traders and option to select which are ranked from their winning.
Always try asking whether to go with a demo account or not, about the initial investment. Whether the trading can be done through mobile or tablet? If there is a selection of the payment if others copy the trades? How to manage the risks etc?
These questions will undoubtedly have an impact on the online platform or network.
Reasons for trying Social Trading
Many people while investing, handovers the responsibilities to someone’s else. It can be a broker, depositing money in the bank, beginning a pension fund etc. While investing, the investors generally don’t know where the money is invested, so it is always a risk. However, this is not the case in copy trading. On the trading platforms, everyone has their profiles which is visible to all. There is a plenty of information to help the potential investors about success or fail ratio, trading history etc. However, based on trading strategies and habits. Because of this transparency, investors can opt to copy traders according to their willingness of taking risks.
Trading is always a time-consuming and depends on the hard work or efforts. Besides, expertise and successful traders go for taking a degree by deep learning the process. With social trading, the amount and the time of learning what to trade and how to trade are minimized when it happened to learn from experienced traders. Thus, with the social trading platforms, it gives the scope of gaining experience as it is widely spread.
Organize a trading community
Social trading networks are the dominant force for building a community of investors. Moreover, investors interact and share information by collaborating on various ventures. As it is online, traders can have access to the information from any place easily provided there is an internet connectivity.
During social trading, investors often stick to the same ideas and methods, overlooking the way the others are thinking. This helps in gaining experience, as there is an exposure to different markets. Investors generally specialize in their specific regions like UK, Europe, USA etc. Others have different knowledge on the financial markets such as cryptocurrencies, forex etc. Social trading gives opportunities who are specialized in new areas, assets, which haven’t know much.
Diverse portfolio & strategies
Social trading platforms are not static or objectives. There is always a room for abandonment and improvement, providing a better strategy. This platform can help in discovering new strategies, based on different objectives, principles and rules. Besides, it helps in diversifying the portfolios by introducing the new instruments. As there is an opportunity of copying the trade, there is always a chance of trading different new instruments like cryptos which have not been traded before.
Investing in financial instruments such as forex, stocks, cryptocurrencies needs extensive experience and knowledge. Investors need to be updated with the latest trends, events and news which affect the business world. Moreover, they should be able to read the charts, reports, analytics. As social trading is more or less related to online network there is every possibility of sharing ideas by interacting with the traders. They even have many benefits if one has the patience to wait and see the successful results.