After revolutionizing the way humans communicate with each other through social networks, social trading on the internet is now revolutionizing the way people operate in the financial markets.
Who doesn’t know about the influx of social networks! The revolution that began with the platforms such as Yahoo messenger has now become a part of our day to day living through the means of Facebook, LinkedIn, and others. We can connect with our friends, expand our networks, keep ourselves updated about their lives, share our stories and news, etc. What happens if you can do all that, albeit with a focus on financial news and investing capital in the financial market? That’s exactly the idea of social trading.
Instead of being present physically in one of the world’s financial markets, the traders and investors can now gather on an online platform to know, learn and share information about any particular assets or market scenarios. Known as social trading, this method is particularly popular among the new investors who find the nitty-gritty of financial instruments to be very daunting.
The basics of social trading
Similar to social networks on the internet, social trading requires you to have an account on one of the social trading platforms. There are quite a few options available, but you have to find the best one with the most amount of active investors for maximum benefits.
The online broker allows investors to buy or trade on a great range of financial instruments including stocks, indexes, ETFs, commodities, cryptocurrencies, currencies and so on. By 2019, they had 10 million active users, making their social platform one of the most important for communication and discussions between traders. AvaTrade is another platform popular among social traders.
The ease of use, as well as the reliability of social and trading interfaces, are crucial in choosing a platform. Whereas, the availability and the active participation of experienced traders are also very important, as the idea relies heavily on the information and opinion shared by the traders to function effectively.
The principles of copy trading
Taking advantage of the features offered by social trading, copy trading is a financial trading method that allows one individual trader to automatically copy the financial actions of another investor of his choice. Effectively, it means that whenever the trader of your choice opens or closes a new position, the same position would be opened in your portfolio and gain or lose in a similar fashion. You can control the amount you are going to invest, but can’t control the decision.
As you can see, it is just an extension of the social trading concept. You just have to allocate a fund to copy a selected individual and keep track of their activities using the social channels. However, be mindful of the fact that past performances are not an indicator of future results.