Social trading

Live Forex Signals Social trading involves the free sharing and using of information amongst a group of traders. The information provides access to new trading ideas, risk management and client sentiment. Social trading integrates the exchange of information into an online discussion. It creates a community feeling as traders can work together to plan specific trading ideas. In addition to sharing research, traders can also pool funds to generate greater gains.

Social trading is a broad category of trading and can include elements of copy trading and mirror trading. Traders can share information about individual trades that can be copied by other traders, or specific trading strategies that can be mirrored by other investors. Social trading can span the foreign exchange markets, as well as stock and commodity markets.

Is social trading profitable?

There are several benefits associated with social trading. Even if one is not open to online social interactions with other traders, there are specific aspects of social trading that can be beneficial. Social trading chatrooms with a moderator allow traders to follow trades and ask questions. This can be a good way for novice traders to learn more about trading and how to make profitable trades.

How does social trading work?

Social trading is generally performed on social trading platforms. Investors can trade within a community and replicate the style of expert traders. Moderators, who are usually experts, drive these discussions. Social trading can also involve aspects of copy trading and mirror trading.

An offshoot of social networking, social trading has created a different way to test financial information. In the past, investors would focus either on fundamental analysis or technical analysis. With forex trading, however, traders can share information about the current market environment and offer insight into future market movements, thus driving trading decisions. For some traders, it has changed the rules of analysis.

Most social trading takes place online. It provides traders with psychological support and can offer different points of view. By emulating some of the techniques learnt in a social trading environment, traders can often improve their trading strategies, risk management techniques and trading psychology. Forex trading focuses on short-term trading. This can in turn provide additional liquidity to the markets. Using social trading, one can also access the historical performance of members and can see the returns produced by specific strategies.

Social trading forum

Social FX platforms often provide a chart forum and social newsfeed. Members are constantly providing information about a specific subject. Traders can post their trading ideas as well as information to back up their thesis. Below is an example of a social trading interaction inside our online Next Generation trading platform, on the trading forum. Traders can engage with other traders and our market analysts to discuss the price evolution of the financial instruments that they are currently watching.

  • Create a live account to access this exclusive feature of our platform. It can be used as a forex trading forum, stock trading forum, or for any other financial market that you are interested in trading.

Social trading vs copy trading

With FX trading, one can garner ideas from many social trading networks. Copy trading, on the other hand, involves solely copying the trades of another investor. The goal of copy trading is for the trader to have the same positions as the investor they are copying. When copying another trader, one doesn’t receive the layout of the trader’s strategy and follows their trades blindly.

Traders can also invest their capital in a thematic investment. These are funds that turn capital over to specific traders who then act as portfolio managers. In essence, one is participating in copying funds. This is a bit like a funds investment, but instead of investing in hedge funds, one is investing a pool of capital into a fund that copies multiple traders. This provides diversity in copy trading and allows returns to be uncorrelated. Traders can perform this on their own, but it’s imperative for traders to ensure that they are not putting all their eggs in the same strategy basket.

What are the risks of social trading?

Like any trading activity, there are risks involved in social trading a market. Whether when copying another investor’s strategy or using the information to create their own trading decisions, traders should understand that there are risks involved and subsequently create their own risk management strategy. All trading leaders will, at some point, lose money. Individuals should feel comfortable that the risks are in line with their individual tolerance levels. The more capital risked, the greater the reward. They should also be aware that some social trading platforms charge a fee.

When allocating capital to forex trading, traders should start with determining the amount of capital they are willing to lose to generate the gains they are looking to achieve.  They must also be realistic. For instance, a trader cannot expect to risk $50 to make $5,000. Traders should carefully look through the risk profiles associated with different social trading leaders and see if they are in line with expectations.

While one can set up an algorithmic trading mechanism, it is considered unwise to leave money unattended. As a very minimum, it is recommended that traders check their trades at least once every day. The best due diligence is to understand the logic behind the trading decisions made by a leader, and to be interactive in asking questions about the strategy one is using.

Summary

Social involves the sharing and using of information amongst a group of traders. There are several types of social trading, including strategy mirroring and copy trading. The information provided in social trading allows access to new ideas, risk management, and sentiment. Social trading can drive a community feeling as investors work together to formulate specific trading ideas. News feeds in social trading platforms offer access to real-time ideas that describe a strategy in detail. In addition to sharing research, social trading can also involve pooling funds to generate greater gains.

  • Social trading community

    Some platforms provide a search criteria so traders can customize their social trading experience. Traders should test drive their trading for a while first before they start copying other investors. Traders should also ensure that the risk score is in line with their expectations and the maximum drawdown is not outside their tolerance level.

    This can mean that they have an average return of 20% annualized but will regularly make and lose more than 50% on their trades. If the average return is 20% and the standard deviation of the returns is 50%, the Sharpe ratio is 0.4.

  • Why trade CFDs on currency pairs?

  • If, on the other hand, the average return is 20% and the standard deviation of the returns is 10%, then one will have a Sharpe ratio of 2. This is very good. The maximum drawdown offers information about the peak-to-trough drop. One should understand that if a leader has a maximum drawdown of 30%, a trader copying this person’s trades could lose 30% from peak-to-trough. MT4 Copy Trading

    In our interactive trading platform, our forex trading community and stock trading community are particularly popular in comparison with other assets. You can access forex commentaries and stock market chatrooms to keep up to date with the latest news and analysis of the financial markets. using forex signals

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