If you are just starting off in the domain of finance, social trading may be the right fit for you. This type of trading does not require any profound knowledge of financial markets and experience as a trader. In fact, you do not need to invest a lot of money to become a social trader.
What Is Social Trading?
Before the phenomenon of social trading appeared on the market, investors and traders were relying on fundamental and technical analysis to make their investment decisions. This means that they were also investing their time and effort together with their funds. In 2010, when the first ST platform was built, everything changed.
ST refers to analyzing financial data by looking at the strategies of other traders and copying these strategies. For a newcomer, it is a simple and intuitive way to learn from the top traders and eventually become an experienced trader who can also share their knowledge with the beginners.
How Social Trading Works
The algorithm of ST is similar to that of an online social network. The difference is that the shared content revolves not around the person’s life but around their trading ideas. Here is how it works:
- You register with an ST platform of your choice and create a profile.
- You can set up your search criteria to find people who may match your investing and trading needs.
- It is also possible to follow the profiles of the top traders on the main page. If you know the names of traders that you would like to follow, you can search for them.
- You start trading based on the choices of people who you follow. You can create your own posts, share them to your feed, like and comment on the posts of others - just like on any social network.
- It is also possible to get alerts on any updates related to your feed and profile, which is also similar to social networks.
During your interaction with other traders, you watch how they take trades and duplicate their trades. As a result, you intuitively learn the trading algorithm, evaluate the market situations, and identify which strategies work well.
Basically, there are two types of social trades:
- Copied trade: Trader A places the same trades as trader B, but in a random way, e.g. they can copy several different trades.
- Mirrored trade: Trader A automatically follows all activities of trader B.
Benefits of Social Trading
As an innovative way of trading, ST has a range of advantages:
- Good for beginners. With ST, even beginners can now join the experienced traders and learn from them quickly and efficiently. As a result, your journey from a novice to a seasoned trader becomes much shorter. Moreover, you do not need to wait until you start earning – it is possible to get the first earnings shortly after you have joined the platform.
- Fast access to trusted trading data. The ST platforms give users instant access to transparent data from professional traders from all over the world. Such free flow of information eliminates the need for long, time-consuming searches.
- A powerful community of investors. ST gives traders and investors an opportunity to work together and form teams that can collaborate on different ventures.
Social trading is something like Facebook for traders where experienced investors share their knowledge with beginners and where traders can work together in teams. It is a good option for those who are just starting off in the world of finance and want to learn and earn at the same time.