Nowadays, social networks and online trading are the most popular industries on the world wide web. Therefore, the idea to combine social networks and trade in the foreign exchange market has appeared.
Social trading unites thousands of traders around the world into one community, within which you can exchange trading ideas, copy the orders of colleagues, watch the trading of more experienced participants. There are special platforms, registration on which is a pass to the professional association of traders. The most popular social trading platforms are:
Varieties of social trading
Social trading is divided into several types. The term “social” implies the interaction of traders with each other through social networks, forums and various Internet resources. The most popular kind of social trading is copy trading. Often, the term social trading means copying orders.
Copy trading is an automatic copying of orders opened by an experienced trader. The capital of a trader who copies orders is scaled to the capital of the trader who provides the signals. As a result, not only trades are copied, but stop loss and take profit as well.
Mirror trading is another kind of social trading. The rule of mirror trading involves an assessment of the situation on the market, historical information, as well as available strategies. Based on the data obtained in the process of analysis, the optimal trading strategy is selected.
Further actions are the same as in the copy trading. Novice traders copy orders that are created by a professional trader. Thus, traders open orders following the strategy chosen by the expert. If in copy trading, the choice of an appropriate professional trader is made by an assessment of his success, then in mirror trading, the trading strategy used by a professional trader is of particular importance.
Advantages of social trading
Social trading has a lot of advantages. It is beneficial for both the trader who provides signals and traders who copy trades. Each platform or broker for social trading has its reward system, which takes into account the interests of all traders. So, social trading is a great way to make money.
Traders who copy orders are charged a certain amount of money, but it is so low that the trader practically does not feel it. It is worth noting that this method of trading also provides traders with the opportunity to communicate with each other through social networks.
Social trading is a great way to make a profit in the market, especially for beginner traders. The main advantage of this method of trading is that to get income, it is required neither experience nor specific knowledge.
Social trading is different from automated trading, where all the necessary operations are performed for you by the robot. In social trading, communication plays an important role, which allows you to master the basics of successful trading in a fun way.
Disadvantages of social trading
The disadvantage of social trading stems from its advantages. Unfortunately, many traders who start copying orders forget that they need to learn to trade and never become successful traders.
You must be aware that social trading, like usual Forex trading, is associated with risks. You can earn in this way, but you depend on the actions of the trader who sends signals.
So, social trading is a useful tool in the trader’s arsenal. To get profit with it, it is necessary to have an idea about trading on the Forex market, to know the mechanisms by which the price of a currency pair moves, to understand the risks. The more knowledge a trader has, the higher the probability of making a profit.