Social trading: what is this?

In this article, we will tell you about one of the subspecies of trading in the international currency market. It appeared and began to be used in Forex quite recently. They call it social trading, and its main essence is to copy the transactions of the most successful traders in order to earn the same amount of money.

What is social trading in practice? Thanks to modern technological capabilities, brokers implement automatic copying mechanisms that repeat transactions not only on the donor account, but also on any other accounts connected to it. At the same time, transactions are made in proportionate volumes, so that the burden of money management also falls on the shoulders of a more experienced trader.

Let’s explain how this works in practice. If an experienced trader, whose actions are copied, opens a deal for $100,000 (10% of his capital), then the same deals are made on all accounts connected to him. However, regardless of the volume of their accounts, only 10% of assets are used.

Technical features of social trading

Currently, social trading platforms offer the implementation of such trading through two main mechanisms:

The first one requires the computer to be constantly on in order to copy trades.
The second one is more modern and involves carrying out all operations with the help of a special broker server, which allows you not to monitor the process at all and not support its execution.
Why is such trading called social? In most cases, such functions are provided by platforms that, on their basis, do something like a social network for merchants. There they can communicate, monitor the statistics of their own and other people’s accounts, as well as do other things that are often characteristic of social networks.

Both beginners and experienced professionals register on such sites, and everyone receives some benefit from such interaction:

  • beginners get an almost win-win and effective method of investing and earning on investments with the ability to follow a more experienced colleague;
  • traders whose actions are copied receive a percentage of the profits of those who use their actions for their earnings;

The site takes a certain percentage of the income for itself.
Social trading is an ideal solution for beginners who do not yet have the knowledge and experience, but already want to earn money. Moreover, this income can be very tangible against the background of what could be even in the most favorable case with their skills. And the possibility of stupid and fatal mistakes is completely excluded. The main thing is to choose the right account for copying. Fortunately, for this, almost every social trading network introduces special ratings, where in the first places you can find really stable traders who show excellent results over a long distance.

Is social trading worth it?

At the moment, the Internet is simply overflowing with a huge number of sites, each of which strives to bite off at least a piece of the pie called the social trading market. However, due to the fact that the Forex market is more tightly controlled and also less subject to volatility, most of these sites are more focused on cryptocurrencies.

In any case, when creating an account and making a deposit on such sites, you should be extremely attentive to reviews on the network. A large part of the platforms under the beautiful wrapper of “social trading” provides functionality that has very little in common with it. At the same time, the administration can engage in frank manipulations with schedules, execution speeds and other parameters.

It is also worth understanding that even if you find a reputable site that is known for its hassle-free service and perfect reputation, replenishing your account and a couple of clicks to set up copying will not do. The difficulty will lie in the process of finding a really worthy candidate for copying deals. Well, or at least the one whose trades can be copied without fear of losing all your capital in the first week after registration.

And here lies another problem, which is the lack of objective statistics. After all, many traders intentionally hide their older accounts and show only young and so far successful ones. Not every newbie will be able to navigate this.

The search for traders whose accounts have a history of 2 or more years also does not always lead to a positive result. Firstly, there are very few of them, and secondly, the displayed data is not always up-to-date.

Summing up all of the above, we can safely say that even such a seemingly easy type of trading as social trading requires certain experience, knowledge and time. You can connect to its use if you already have some experience in independent trading, as well as a significant amount of knowledge of materiel. Otherwise, the trader runs the risk of facing not the most pleasant consequences in a case that promised only profit and income.

It is important to understand that despite the fact that you will not trade, all the risks associated with the loss of funds fall only on your shoulders. And to the one whose activity was copied by your account on the site, you will not be able to make any demands. The broker himself will always be in the black, regardless of the outcome of transactions.

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