Basically, social trading is referred to as ‘copy trading’ or ‘mirror trading’, it is a concept which comprises of ‘coping’ another traders’ strategies and methodologies to make successful trades, preferably of those traders who have been in the game for a long time and have amassed considerable experience. Social traders basically use a barrage of different online trading platforms to mimic consistent trading outcomes over a given period of time. So, in other terms, they mimic other traders who repeatedly make good trades.
In the Forex market, such successful traders are known as ‘lead’ traders. In social trading, what happens is when one of the lead traders place an order to sell or buy in the market, the exact same trade is displayed and managed on a social trader’s account.
Over the last ten years, social trading has seen a rise in popularity, specifically in trading areas like Forex and binary trading options. However, it is still a fresh trading trend. Social trading has seen a surge in popularity because of the massive increase in different markets has balanced the field and the trading information that was once only available to a few larger groups of traders in the market can now be accessed by all sections in the trading market. But a disadvantage of this wide reach of information is that traders who do not possess the experience or the necessary aptitude to trade and those who trade on minimal communication networks always tend to lose a significant amount of money.
However, the advantage of this situation is that now traders can discuss trading ideas and strategies with one another and view the current trading environment and the Forex markets from different perspectives. Although, there has been a downfall of this in retail trading when everything shifted to laptop and computers, there have been several outlets which have identified this problem and introduced social media networks to allow traders to discuss various different trading strategies with each other through their smartphones, tablets, laptops, etc. They now have the power to figure out the impact of different market events, thus allowing other social traders to copy prominent traders in the market.
Eliminating the Bias
Another advantage of social trading is that when you take trading and make it accessible to a wider group of people, not just individuals but to a community, you enable the members of those communities to trade without having to resort to personal bias which could lead to loss upon loss.
Moreover, when you add crowdfunding into the equation, it becomes much easier to target different groups to promote social trading by developing more social trading platforms which both teach and allow traders to trade efficiently without making silly mistakes. So, when traders come together as a team and a social group, it makes things far easier for them, especially when discussing how to approach a market, how to evaluate it and make good profits.
Understanding Majority Response
In order to build and act on a potentially lucrative trading idea, it is important you consider the sentiments of the majority actively participating in the trading markets. The strict reality of investing in stock is that you can indeed have a logical, analytical and a knowledgeable approach to a specific trade.
However, if a majority of the traders in the market do not favour that stock or strategy, your methodologies will amount to nothing. When you trade in complete isolation, it can become extremely complex to gain different perspectives in the market, especially of other traders. The only way you can eliminate this problem is engaging in a more open environment with other traders.
This surge in social trading and the emergence of social trading platforms is the immediate expression that signifies the need for discussions among investors, both rookie and professional, so that they can work out strategies resulting in a win-win situation for all.
Social trading platforms have indeed gained a massive recognition and enjoy a good reputation in the market which proves one thing: it is still a good idea to discuss and conduct considerable research of different reviews and trading testimonials before you actively participate in the market using any of the available social trading platforms. In any case, the merits of social trading are plenty, especially if you compare them to the disadvantages of isolated trading in a market which is expected to expand in the coming years.
Chris Turner is a versatile content writer with a passion for technology, finance, Investing and trading. He writes extensively on the subjects of Trading, Investing, Bitcoin, Forex trading, investing and general finance. He is writing and providing advice, education and encouragement to budding investors and traders, on Hedge Fund and alternative investments and other emerging financial trends. He is a contributor writer for HedgeThink.com and TradersDNA.com.