What is social trading: benefits and disadvantages

by Brian Wallace Affiliate Marketing

Social trading is a relatively new phenomenon in trading. Nevertheless, it has already become a worthy competitor to PAMM investment and has gained thousands of followers around the world.

Social trading is the interaction of traders on a social network on trading in the international financial market. Recently, with the development of the functionality of messengers, social trading is gradually moving there.

What is its advantage over independent trading? What are the disadvantages? What opportunities does social trading open to market participants? In this article, we will review all of these questions thoroughly.

Essence and principles

Social trading brings together thousands of traders around the world into one community, within which you can exchange trading ideas, copy transactions of colleagues, and watch the trading of more experienced participants. How is the process organized?

There are special platforms, registration on which is a pass to the professional association of traders. Copying transactions is provided by the technical means of the selected service.

The most popular social trading platforms are the ones that offer a wide variety of opportunities. And it should be said that the benefits of social trading networks are plenty and it is gradually taking a foothold in the trading scene.

Social trading opportunities

Social trading is a bit like social media. The only difference is the audience of the community. While the former unites people who are exclusively interested in trading, the latter is tailored to any category of society.

Thanks to social trading, the popularity of the Forex market is growing. At the same time, people who are uninitiated in the intricacies of trading actively participate in the life of the financial market and earn money without even having an idea of how the currency exchange works.

The conditions for copying deals are different depending on the site. There is a charge for connecting to the copy service. In some cases, it represents a commission for profitable trades. In others, the trader pays for a subscription for a specific period.

Advantages and disadvantages

The benefits of social trading are numerous. By observing the trade of more experienced colleagues, you can learn to trade independently, learn from experience, study strategies and principles of money management, share your ideas and best practices, get advice and get help.

The most obvious benefit of social trading is that it is easy. Following the experience of professional traders, there is no need to do your own technical or fundamental analysis. It's like answering an exam before the teacher even asks questions!

When trading on social media, Forex traders have a direct connection with thousands of other traders in an environment where they can interact with each other, discuss points of view, and then duplicate trades that are appropriate for them. Both beginners and experienced traders can learn how top traders arrive at their decisions and what strategies they use.

Another important benefit is that when trading within a group or community, it is easier to avoid personal biases that often lead to losing positions. This approach is more objective. For example, the appearance of "minuses" provokes emotional reactions in the trader, and this often leads to bad trading decisions in the future. When traders work together as a unit, it is easier to discuss and analyze market activity as it occurs and make smarter decisions.

Finally, by publicly opening a trade, possible restrictions of international banks are excluded, and transactions posted on a social trading platform are copied directly, no one can interfere with a trader's trade

Despite its many advantages, social trading also has a disadvantage.

The platforms bring together a huge number of people who trade in the Forex market. Not everyone is a professional, and everyone can suggest their own copy strategy. In order not to get serious losses or even lose capital, carefully choose the traders whose trade you follow.

The most promising candidates are usually listed as the most popular. Pay attention to the traders with the maximum number of followers. Study their strategy, observe their trading, pay attention to their principles of risk management.

There are advantages and disadvantages to all investments, and the same holds true for social Forex trading. The key to success in any endeavor is knowledge - the more a trader understands how a financial instrument works, the less risk is.

Social trading is an effective tool in a trader's arsenal. To make a profit, you need to have an idea of trading on the Forex market, know the mechanisms according to which the price of a currency pair moves, and understand the consequences of overestimating risks. The more knowledge a trader has, the higher the probability of making a profit.