Social Trading, also known as copy trading, has emerged within the online trading industry. An innovative concept allows traders to follow other successful traders by copying their trades directly into their accounts.
It rules out what brokers call “manual trading”, which means executing your trades by analyzing the market and making decisions yourself.
How does social trading work?
Perform a search on social media for any term related to forex trading, and you will find hundreds of thousands of people willing to share their knowledge or ideas with others – whether that be good or bad.
The majority of these people share honest opinions based upon their successes or mistakes to help others who may have similar problems/goals.
If someone trades account or signals, which helps ensure traders are not copying just one trader but several.
It allows the trader to follow various opinions and diversify their trading capital.
Key benefits of social trading
There are many benefits to using social trading systems for forex traders, including:
By diversifying among different trades, you reduce having all your eggs in one basket.
Copy successful traders
Why try and reinvent the wheel when others have already spent many hours perfecting their strategies? Follow other successful traders today.
Develop your strategy
With so much copy trade information available, it will give you an insight into what strategies could work for you by studying their approaches. You can consistently make profitable trades.
Their followers would expect them to share the details of those successes to replicate what that person is doing.
Copy traders follow this principle by copying other traders’ signals into their accounts with the forex broker.
The copy trader does not know why these trades are being recommended, but they know that there must be a reason for all the people following this particular trader.
There are options available to help ease trade copying, including auto trade systems that automatically place orders for you or manual systems.
You can click and hold your mouse button down while hovering over an order box, allowing you to see your pending order before finally sending it through.
Brokers providing social trading offer clients access to several different traders you can follow, helping diversify your account capital.
Social trading is designed to benefit both the trader who is copying others trades and the traders whose trades are being copied.
Of course, this means that all of the people involved – including the person/people who started the trend must be profitable with their trading strategies.
Having so many people following them acts as an advertisement for their trading style, and at worst, it will not affect their results by much, if any.
Unscrupulous copy trading schemes
Like anything else in life, some bad apples out there will try to take advantage of new or naive traders who may not be aware of how social forex copy trading works.
Copy-trading schemes often require you to pay a membership fee or sign up for some form of the newsletter, which is designed to make money from the trader whose trades you are copying. It can cost traders more than they ever made with their copy trading strategy.
It cannot be permanently guaranteed that all traders you follow will be profitable – social trading allows forex punters to access multiple different trading styles and see what works best for them.
What is social trading in forex?
Social trading allows forex traders to copy other traders’ signals into their accounts, allowing users to follow other successful traders by copying their trades directly.
This type of software will likely continue to grow as the online forex industry evolves, helping some people save time and money while providing others with additional opportunities to make money online.