Brokers are offering social trading to all their clients, this is yet another way for them to learn to trade better. Previously, they had education and self-training, with reviews, opinions and comments. Traders also have social networks, especially Facebook and Twitter. The issue with social trading is its efficiency. An important detail: it does not generalise all traders, from beginners to experts. Here you will see all the factors that influence good social trading, remembering that its use is not mandatory. It can be seen as the equivalent of a social network within the broker.
Definition of social trading
It is mostly used for Forex, here traders of a broker meet in a social environment, among them, the trading is uncovered when they exchange suggestions, ideas and advices. These recommendations come from traders, the idea is to copy successful strategies when trading Forex, in most cases. For that the broker can contribute with his own web page or his social networks.
Social trading platforms
By “platform” we mean the different options that traders have to copy their strategies, provided by the broker, as you will see below:
Copy Trading
This is where the client of one broker can copy the strategies of another, directly from his trading platform. The most common is to look for leading traders and trade based on their experiences.
Social Trading
In this platform the strategy is copied from one trader to another, the differences are two, one is that the clients of the broker can review the layer of social data of another. The objective is that trading strategies alone are not decisive, but the traders’ social data. Here, for the first time, brokers’ clients interact with each other, sharing knowledge of the market.
Mirror Trading
Here there are two objectives: copy a trading strategy and evaluate one, without forgetting the signals given by other traders. Mirror trading offers two alternatives to brokers’ clients, the first is for the trader to design his own strategy based on proven ones. The other is to copy it.
Social Forex Trading
Choosing a social trading platform may be more difficult than choosing a Forex broker. Both situations involve currency pairs, leverage, margins and regulation. There is also the interaction with other broker clients. Other features to take into account are the minimum deposit, you can get one of 100 dollars, although it is a low figure to enjoy social trading. To try many strategies you will need more capital, especially from trading leaders. Another aspect is regulation, the social trading platform must also be authorized. Another feature are currency pairs, the broker client must make sure that he finds the currencies he invests with, these can be all the major ones or one in particular, for example. You also have to make sure that your currency pairs are being traded by other traders, plus you are not obligated to follow a broker client who does not like your strategy. Finally, we have commissions, spreads and charges. Copy trading does not usually have an associated fee, although trades do have an associated fee. In social trading there are also the same expenses as in the Forex broker, the hidden commissions, for withdrawing money a charge and the spread, affecting the income of the operation.
Choose your social trading trader
In social trading there are as many strategies as there are traders, the two alternatives go hand in hand. The broker’s client is recommended with greater followers and benefits. When reviewing your strategies, evaluate the frequency with which you open positions and your risk-reward relationship, in addition to other considerations, including the number of trades handled. For example, if a broker’s client does not handle a dozen trades per week, look for a trader who performs fewer trades that could be better planned. If the trader’s intentions are concrete, a currency pair or specific strategies, look for in-depth trading leaders, then select which one best suits your investment characteristics. Finally, the trading platform will not determine which leader to follow, if your interests. Social trading is not an obligation, but brokers’ clients are taking advantage of it to improve without depending on their staff. It is not easy to choose a trader to follow, although it is not impossible either. The broker’s client should not be pressured by social trading, he should have the same patience he had when trading Forex, for example, when he did not know this investment advantage.
