Social Trading is a new financial trend, which allows investors to make money from forex, stocks and commodities by using social indicators and copying other traders. Besides the possibility to interact and communicate with other traders, social trading platforms give you the oppurtunity to profit from other people’s experience in forex and stock markets. Right now social trading is especially popular amongst forex traders, whereas social trading in stock and commodity trading still is in its early stages.
Social Trading in Theory
Since the concept of social trading is quite innovative its progress is traced with huge interest by many people. For the first time financial markets become a realistic money making oppurtunity even for amateurs, who benefit from other traders’ experience. The main benefits social trading provides are:
- Transparency and information. Due to the communication with other traders decisions can be made based upon diligent consideration. Other people’s trades are visible and comprehensible at any time.
- Trades can be copied from other traders at will – this is called copy trading or mirror trading.
- Whole strategies can be filtered regarding risk tolerance, possible revenue and other important parameters. Different strategies can be employed to minimize risk.
- Greater insight into market psychology.
The main strength of social trading can be the biggest challenge aswell: Due to the fact that any trader can be copied you are likewise exposed to the danger of copying losing strategies . This means you cannot only participate in winning but also in losing trades. This risk needs to be minimized by chosing your traders carefully to protect your capital and increase revenue.
Social Trading Broker
During the last years a lot of brokers engaged in the concept of social trading. Yet there are still huge differences regarding the diversity of features social trading platforms provide. Because of that it is recommended to open an account with one of the established brokers. The two biggest platforms right now are ayondo and eToro. In addition to the core functionality both brokers provide useful information about trading including free ebooks and webinars.
On this website I will give you my detailed review about eToro and give insight into my first steps in social trading. For realistic results I opended a trading account with etoro, which was funded with $ 300, which will hopefully be increased in the future making use of the benefits of social trading. Whether or not this endeavor will be successful can be monitored in my social trading blog, where I will update the status of my account on a regular basis.