What is Social Trading and Copy Trading
In trading there are many strategies that one can use to make money. Two of the way that we are going to explain are social trading and copy trading. In the following article we are going to discuss the advantages and disadvantages of these two approaches.
Copy Trading
Copy trading as the name suggest, is one way to automate your trading by copying other traders. This strategy is used by beginners that probably do not know how to trade, with the advantage that they can be taught along the way. For those traders with experience, this strategy allows them to leave their screens, as all trades are automated.
The aim of copy trading, like regular trading is to open positions on various financial markets including FX, CFDs on Stocks, commodities, indices and cryptocurrencies and then to close the position with the hope that the asset has moved higher. Although, much like trading for your self
Moreover, it is also a good choice for traders who lack the time or experience to invest themselves. Many brokers, offer the facility of copy trading. There are variety of platforms offering copy trading services some manual, others fully automated.
Pros of Copy Trading
- Allows first time traders to become familiar with the financial markets while gaining confidence to trade
- Helps newbies to learn how to trade by watching actions of others who are more experienced traders in most of the cases.
- Allows experienced traders to take part in the market when they are busy and are not able to invest the time and research
- You can copy different instruments such as Forex exchange, stocks, commodities and more
- Creates a community of traders, beginners and experienced alike who can exchange ideas, strategies and work to improve their traders together.
Social Trading
Social trading, on the other hand allows you to interact with other traders and gain insights. This is done by participating in online trading communities or forums. You can follow traders to see their history and gain insight into the thought process behind each move.
Pros of Social Trading
Social trading, on the other hand allows you to interact with other traders and gain insights. This is done by participating in online trading communities or forums. You can follow traders to see their history and gain insight into the thought process behind each move.
- Traders can learn from more experience traders. By copying the trades of successful trader, newbies can learn what strategies work for the and what to avoid
- Social trading platforms provide transparency. This means that all traders can exactly see how other traders are performing and how much money they are making. This makes it easy to choose which traders to copy
- Social trading can help to diversify an investment portfolio. Instead of investing all of their money in one stock, pair or commodity, social traders can spread their risk by copying the trades of multiple investors.
- Social trading platforms are typically very user-friendly. Many of them are offering features like live chatrooms and news feeds that make it easy for investors to e up to day on market conditions.
Before you start copy others…
If you decide to use these two strategies, there are still things you need to be aware before you start copy others.
First of all you need to know your currency pairs: If you want to copy others, you still need to have a good understanding of the different currency pairs available. Ensure that you know how each pair works before you start trading.
Secondly, you need to use technical analysis. This can be very useful in understanding how price is moving. You need to learn how to read charts and use technical indicators to understand other traders’ analysis.
Thirdly, it is vital to always uses proper risk management techniques when copying other traders. This will help you to minimize your losses and maximize your profits.
Lastly, you have to be patient when copying. There is no such thing as a quick and easy profit. If you want to succeed you need to be patient and wait for the right opportunities.
