First, let’s see what social trading is like.
Social trading is the Internet trading in various financial markets with the use of a social platform that allows traders to interact with each other.
Recently, the popularity of special social networks, which allow traders to copy transactions and strategies of professionals, is growing.
In Europe and the United States, there are already several dozens of such systems. At the same time in Russia, social trading is still in its infancy.
Special programs contain all the functions necessary for trading. With their help, traders can communicate with each other. Professionals talk about their transactions, investment plans. Thus they transfer their experience to beginners, and also send trade signals. Beginning traders, using such platforms, accept trading signals and increase trading experience.
The main advantage of social trading is copying transactions (copy trading) . This opportunity allows you to go out in profit even to those who previously could not do it. Before the advent of social trading, many newcomers were not successful. Moreover, often they very quickly “merged” their deposit.
The essence of copying transactions is that it allows inexperienced traders to choose their mentor and connect to his trading strategy. After this, absolutely all transactions of the professional will be transferred to the account of the beginner.
Many consider social trading as a method of passive earnings. However, professionals do not recommend blindly trusting experienced market players. Anyone can make a mistake , even those who previously showed excellent results. Moreover, it is not unusual for signal-passing traders to succeed in the past accidentally. As a result, the wrong choice of a mentor can lead to losses, loss of the deposit, partially or completely.
Despite a certain risk, social trading is useful for both parties:
1. A trader who transmits trading signals gets the opportunity of additional earnings. He gets a commission from every profitable operation of newcomers who are connected to him.
2. On the other hand, a beginner trader with a proper choice of mentor can make good money without spending time learning to trade.
Scheme of work of social trading
The financial market offers several good platforms for social trading. The conditions they offer may differ significantly.
(A) Some companies allow you to join them only after refilling the account for a large amount, but do not deduct taxes from the profits of customers.
(B) Other platforms are tax agents and automatically transfer part of the profits to the budget, but they are licensed by the Central Bank.
In any case, the choice of a partner depends mainly on the trader’s preferences.
Regardless of which company the trader chooses for social trading, the work will include the following stages :
1. registration in the social platform;
2. studying the work of the platform, mastering the basic principles of trading with its use;
3. analysis of the rating of experienced traders, as well as their proposed trading strategies;
4. replenishment of the account opened on the platform;
5. connection to the chosen trading strategy.
After connecting to a professional, a newbie will be able to track and repeat his transactions. If the account balance grows gradually, then the choice is made correctly . If, however, during the copying of transactions the newcomer realizes that there are more unprofitable operations than profitable ones, then the choice has been made incorrectly and it is necessary to disconnect from such a strategy.
In fact, it’s not necessary to connect to one strategy. It is much more effective to create a certain portfolio from different traders. This will help significantly diversify the risks, that is, reduce them. According to one strategy, profits can be observed, while on the other, a loss can be observed. As a result, the probability of income generation increases.
In addition, it will not be superfluous to work with the account settings. It is necessary to use the function of limiting losses and not too bullying the size of the leverage.
Professionals advise newcomers of social trading to check the chosen combination of strategies on the demo account . So you can see the effectiveness of the portfolio without risking real money.
Once again, social trading is beneficial to both parties :
1. Professional market players get an opportunity to get high income by supplying signals to their customers. If the trader’s trade is successful, he will be able to attract more and more new customers. The higher the profit, the more customers will be able to get, and hence the profit will also grow.
2. For subscribers, social trading is also a very effective tool. In addition to profit, they can receive additional knowledge. Beginners at any time can communicate with the signal provider using a blog , personal correspondence , comments . Thus, a novice trader receives the necessary information about the conduct of trades, as well as planned actions.
TOP-3 of the best platforms for social trading
On the Internet, you can find quite a lot of platforms that provide an opportunity to earn with the help of social trading. Among such a huge number of newcomers can not easily choose the option that will satisfy his needs.
We have made TOP- 3 the best platforms of social trading . They fundamentally differ from each other in the principles of work.
1) Metaquotes – built-in service from Metatrader
Metatrader is one of the most popular platforms used for stock trading. Naturally, they could not ignore the growing popularity of copying transactions.
The developers decided to build a special service directly into the trading platform. So Metaquotes appeared . It allows any user of the MT4 program to receive signals and copy transactions. At the same time, it does not matter which broker a trader has opened an account with.
A fundamental feature of Metaquotes is the strict selection of signal providers . Before you can share your strategy with other users, the trader must show a positive result for a long time on his account.
2) CopyFX service – offer from RoboForex
Social Trading platform – copyFX
Only the clients of the RoboForex broker can use the submitted trader . However, to analyze the proposed trading strategies and calculate the estimated profits, using the history of trading of various traders, CopyFX allows even before the opening of a trading account.
The investor is provided with a convenient calculator . It is enough to set the amount and estimated time of investments to calculate the approximate income. Also, the calculator allows you to make calculations for different levels of aggressiveness of the trading strategy.
3) An independent platform for social commerce – ZuluTrade
Social Platform – zulutrade
The service is not related to specific dealing centers or a trading platform. ZuluTrade acts as an intermediary between clients of various brokers. This approach allowed to create a wide network of users living in different countries and using the services of different brokers.
To join ZuluTrade , you just need to open a trading account with any dealing company and link it to an account in an independent platform. The service allows users to exchange signals not only for Forex market instruments, but also for trading binary options.
Pros and cons of social trading
Social trading, like any other financial service, has a number of advantages and disadvantages . Before deciding to use it in trade, it is important to carefully study all the nuances. This is the only way to understand how effective such an interaction will be.
The main advantage of social trading is the opportunity given to them to work in a team . Traders who are connected to the platform can use the most up-to-date data. With the help of social trading it is possible not only to increase the profit received, but also to increase the level of financial education, to increase experience and professionalism.
In addition, among the advantages of (+) social trading can be identified as follows:
1. The ability to use a special social network to generate income;
2. A reduction in the level of risk in training for trading;
3. Additional income, both for experienced traders (due to the supply of signals), and for beginners (by copying transactions of pros);
4. The ability to diversify risks;
5. Independent decision-making regarding trade;
6. The absence of the need to conduct analysis in case of copying transactions allows you to save time;
7. Ease of use;
8. The opportunity to get advice from professionals, discuss the advantages and disadvantages of the developed strategy;
9. Contests, bonuses.
Despite such a number of advantages, you can name a number of pitfalls, ignorance of which can lead to unpleasant consequences.
Among the minuses (-) of social trading are often called the following:
(A) Non-compliance by the supplier with risk management signals, as well as trade for luck, may lead to losses of users connected to it;
(B) Incorrect copying of transactions often becomes the reason of leaving in a minus;
(C) An error in choosing a trader whose signals are recorded in the trade also leads to losses.
Social trading is a unique system that can bring additional income to traders. But do not forget that in the absence of a competent approach to its use, you can get quite serious losses.