People always wonder how they can get the edge over their competitors when they’re investing, but is this necessary? At face value at least, other traders may seem as though they’re your rivals, but could they actually help you? The answer to this is yes, other investors can be your friends and trading allies. All of this is possible through social trading. Here we look at what it is and how it can help you.
What is Social Trading?
Social forex is founded on the principal that traders can help each other navigate the world of forex, sharing hints and tips at every possible opportunity. If you’re the type of person who thinks along the lines that a group of minds is better than one then social forex is definitely for you. However, if you see yourself as more of a lone ranger who looks to swim against the tide, then it may be wise to look elsewhere.
Because of the liquidity in the forex markets, there’s no way that working together could possibly manipulate the markets and so, social forex will not affect your profit margin. Contrary to popular belief, social forex isn’t only for beginners, and it is helpful for traders of all levels. Here’s how:
New Traders Looking for Help
If you’re new to trading, then it can be really hard to know where to begin. At first, the prospect of trading can seem daunting but, sadly, throwing yourself in at the deep end is the only way that you can overcome this fear. However, by doing this, you’re making yourself susceptible to market risk, and at risk of losing money. This is where social forex is incredibly useful, as other traders can help guide and educate you, showing you possible gaps in the market and how to exploit them for profit. To supplement this, it is also worth following successful traders on Twitter.
If you’re already an experienced trader then it doesn’t mean that social trading isn’t for you, it merely means that you need to find a different sphere of influence to operate in. If you’re an ECN Trader then it is likely that you’ll have access to complex charting software that is far easier to exploit if you’re in a group. The more brains that are involved the merrier when it comes to social trading, and expanding the knowledge base will only enhance your prospects of turning a profit. If you already have the experience, stay away from forums and focus on charting software that can provide you with detailed, technical analysis that can be interpreted in groups.
Downsides as well as Upsides
Sadly, many trades do not reach their full potential, falling prey to the pitfalls of social trading. Although it is tempting (particularly for new traders) to simply copy the trades of others, this is never an action that should be taken, as by doing this you’re effectively giving somebody else your money to trade with. In the wrong hands, you could lose a lot of money, so never adopt this strategy.
If you’re aware of the pitfalls, however, social treading can help you massively, so consider giving it a try.