While social media has become wildly popular, and the same ideas created social trading platforms can be used to learn about Forex trading. Instead of sharing an idea about popular culture or their personal lives, social trading platforms allow successful traders to interact directly with people who want to learn from them.
In some cases, the traders simply open up their trading strategies to other traders. But investors can also copy the trades of successful traders in real time. There are a number of benefits to social trading, and many people have benefited from this up and coming system.
Social Trading Brokers
Some brokers offer you access to detailed information about the other traders and their strategies, while others only give you information about how successful other traders are. There is no one right platform, and you will have to choose the format that fits your goals. Here are some of the best brokers if you are interested in social trading.
|Broker||Min. Deposit||Regulated by||Next Step|
|$ 5||FCA Regulated.||Sign Up|
|$ 250||CySEC Regulated.||Sign Up|
|$ 100||ASIC Regulated.||Sign Up|
What is Social Trading?
People who want to learn from experienced traders can talk to them directly via a social networking platform and copy their trades in real time.
Social trading platforms also give users the chance to connect with each other and discuss markets and trading strategies. This allows investors to form groups that focus on their needs, and grows an online knowledge base that makes learning much easier.
If you think about Facebook or Twitter, you are basically looking at the same ideas that make a social trading platform work. Investors can look through profiles of traders that consistently make money, and learn from what they do well.
This model allows people to focus on the kind of trading they want to learn and isolate a market that works for them.
Advantages Of Social Trading
Instead of paying an investment manager to gain targeted exposure to a specific market, social trading networks have created a forum for people to learn how to manage their own money.
The ease of sharing information makes getting up to speed on how markets move simple. This makes sense for short-term traders, but it also opens up the world of derivatives to people who want to hedge their positions in other markets.
In addition, it lets people better understand the way that professional traders operate, so they can decide if active money management makes sense to them. Because social trading platforms offer real-life feedback on how a trader performs, it is easy for other people on the network to decide whether or not their track record merits attention.
Disadvantages To Social Trading
There is a risk that new traders may have unrealistic expectations of veteran traders who have a winning record.
Just because a person has made a number of winning trades, it doesn’t mean they will continue to do so. A high ranking trader isn’t going to make money every time they put on a position, and new traders shouldn’t mistake a solid record with a guaranteed payout.
Social trading lets people learn from experienced traders, but these platforms run the risk of enticing inexperienced members into trading more than they can afford to lose. People still need to make their own decisions when it comes to risk and loss, no matter how much information they have access to.
Popular Social Trading Platforms
This is one of the oldest social trading platforms there is. They have traditionally focused on FOREX, but recently CFD’s have become more popular.
They give investors access to detailed information about trading strategy, and let people connect with advanced traders.
A newcomer to the social trading scene. Although it is popular, their platform doesn’t allow direct communication.
They are known for their payment scheme that rewards success, which attracts some great talent. This may not be the perfect platform for investors that want a lot of conversation, but if you want to trade with a high probability of success, it makes sense to check out.
If you are looking for access to detailed trading strategies, Darwinex isn’t the platform for you.
But if you want to trade with investors that have advanced trading strategies they are rewarded for, this is an incredible platform. They also offer risk assessment tools that can be very handy for new traders and could save you from some major headaches.
Sometimes called, ‘The Tinder of Trading’, SwipeStox offers direct connections like nothing else. For an app-based platform, they offer a lot of options, like copy trading and access to trading plans.
Much like Tinder, they use a ‘swipe right’ feature to connect you with successful trading plans. For traders that are looking for a robust platform, SwipeStox might leave them looking for another toolkit to complement its functionality.
For investors that want a wide variety of markets, and the ability to decide who they want to pay for trading ideas, PeepTrade is a good choice.
Designed to help investors and traders alike, PeepTrade lets its users connect to pretty much anyone on the platform. They can also look though successful portfolios for a fee that is decided by the author of the portfolio, and trade based on what they learn.
Sharing And Learning With Social Trading
Clearly one of the biggest advantages that social trading offers over other forms of investment education is the ability for users to connect with other people on the platform.
This is a big change from the highly secretive world of professional trading at money center banks and hedge funds. In addition to being able to have conversations with like-minded investors, social trading networks give innovators a way to monetize their algorithms or trading systems.
Ultimately this form of learning easily justifies its cost to its users, though new traders should proceed with caution. This point is sure to come up on the social trading platforms, which are a big positive overall.
Social Trading vs. Copy Trading
Some of the brokerages that provide social trading tools go a step further and let their users copy the trades of a successful trader. This is known as ‘copy trading’.
In most cases, clients can designate a portion of their accounts to copy the trades of a selected trader. This trading method has been met with some criticism, as new investors may not be able to fully understand the risks they are assuming.
Regulators have also expressed concern that copy trading is a form of investment planning, which falls into another category of regulatory requirements. If small amounts of a trader’s funds are designated to copy trades any risks are minimized, as they aren’t likely to take significant losses.
Both copy trading and social trading are gaining in popularity all the time. Given the amount of money they save people, and the incredible amount of information they deliver, they are both probably going to continue to grow for the foreseeable future.