Social trading is an increasingly popular method that’s being used by Forex and stock traders, in which the actions of expert traders are copied in an effort to achieve consistent trading success. Several social trading platforms and networks have arisen to accommodate this interesting trend that is helping novice traders make better decisions.
The concept is based upon the premise that it’s easier to mimic the trades of already successful traders than to conduct your own analysis. However, is this really the right option for beginners? Here are a few reasons why you may or may not want to use social trading to your advantage.
Trading Socially Versus Blazing Your Own Path
Social trading gives you somewhat of a head start in that you’ll be able to get in on trades that you would have otherwise overlooked or missed out on. The process is similar to heeding tips and suggestions from a newsletter or blog, except instead of general advice you’ll have access to the exact moves that proven traders are making on a daily basis. While this method eliminates the hassle of having to do your own analysis, it also can prevent you from learning the fundamentals properly if you become too dependent on it, so it’s still wise to do your own research and compare platforms using sites like InvestinGoal.
Social Trading Can Be a Shortcut But it Still Comes with Risk
Just because you have access to the trading decisions of experts, doesn’t mean you’ll be able to safely follow along without taking any financial risk. In fact, more than likely you’ll have to start out by significantly downscaling the size of your trades compared to the amounts that the experts are dealing in. It’s important to note that even professional traders can make mistakes, so it’s never a good idea to have 100% confidence in a trade simply because someone else thinks it’s a good idea, even if they do have a track record of trading successfully for years.
Choosing the Right Social Trading Platform Is an Important Step
With so many social trading platforms popping up recently, the comparison process can get a bit tricky when you start looking at all the different features available. As a rule of thumb, you should aim to use a network that includes access to a mobile app and demo account at bare minimum. Look for reviews and blog testimonials of existing users and take advantage of free trials to try out the platforms before you commit to a paid membership.
Combining Social Trading with Your Own Speculation
In closing, although social trading can be a powerful addition to your arsenal, it’s not wise to rely solely on this method of speculation, as independent research and analysis can be highly beneficial. Thus, you should try to spend a least a couple of hours per week studying the market and practicing various trading strategies without any external input. By building your own skill set while also following the actions of successful traders via social trading platforms, you can stay up-to-date and in-tune, yet flexible enough to adapt and progress into a self-guided expert yourself.
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