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Social Trading: What You Need to Know and How to Benefit from It

Posted by Fullerton Markets on April 28, 2021 at 4:48 PM


Wouldn't it be great if you have someone you can tap into when you hit a snag while trading Forex or stocks? To have someone you can ask for a guide or information. Or, to have an entire community support you in your trading journey.

Sure, you have social networks for that. But there's an even better option: social trading. 

This is what we'll look into and how you can leverage it to boost your portfolio's profitability, or to simply make currency trading entertaining and educational at the same time.

What is social trading?

Social trading is where you can obtain and share information with other traders in real-time, as well as replicate trades online. 

Its primary objective is to provide a  platform for strategy/signal providers (SPs) to showcase their skills and grow their following, and for strategy/signal followers (SFs) to find a high-performance trader to replicate.

Unlike fundamental and technical analysis, the data shared are user-generated and analysis is performed by other members of the community. 

This proves incredibly useful for beginners since they'll have access to information that experienced and professional traders share for free. Think of this as the pros hand-holding the novices. 

Social trading is just as valuable to those who've been in the trading industry for longer. This is because it eliminates the hassle and stress of performing analysis on those lazy days. Just like influencers, the platform also showcases the skills of seasoned traders and helps them gain followers in the process.

How social trading works

illustration of how social trading works

Social trading is similar to social networks because it allows you to get information and collaborate with other interested parties. You connect with other traders like you would in Forex groups on Facebook to obtain and exchange data, ideas, methods, and strategies. 

The difference is that the information flow is focused on trading and traders. Exchange of ideas and data also occur on a specialised network. 

On social trading platforms, you can: 

  • Check out a trader's portfolio
  • Follow a trader and get live trading feeds on their activities
  • Decide on your next trading move based on vital information shared
  • Help fellow traders by sharing your own thoughts and ideas

Most importantly, you can easily verify the veracity of the data shared. Social trading platforms vet their members, which help ensure the validity and credibility of shared information.

Moreover, social traders trade with their own money. This means they’re highly motivated to showcase a good performance and have a vested interest in the entire exchange. If legitimacy and reliability is a problem in most social networks, it’s not as much in social trading. 

Below is an example of how one aspect of social trading works. 

1. Trader A shares that a prominent electronics company will release a new product. This indicates that its stock price could increase. 

2. Trader B reports that the company is involved in a political controversy, which could mean the stock price will decrease. 

3. You check both traders’ portfolios and see whether Trader A bought shares from the said company to support his claim and whether both traders are fully qualified to provide reliable information. 

Because you’re sourcing data from a social trading platform, you're assured of credible information.

How will you benefit from social trading?

Social trading is beneficial for both new and experienced traders. After all, it is where beginners get useful and reliable trading data they can use, and professionals earn money and social status by showcasing their trades and gaining followers. 

Through social trading, you can: 

  • Access reliable trading information quickly, delivered to you by professional traders across the world. 
  • Reduce the learning curve, duration and cost of becoming a Forex trader since you'll learn efficiently from seasoned traders. 
  • Earn and learn at the same time, especially when you follow a profitable trader. Once you gain enough knowledge and confidence in your skills, you can then switch from a signal follower to a signal provider. 
  • Become part of a community of traders and investors, and find opportunities to earn and build wealth. 
  • Improve your skills in risk management, helping you prevent potential losses in future trades.

Choosing the right type of social trading for you

1. Signals or tips

This type of social trading is where you can obtain signals and direct market position that will guide you on your next trading move or decision. Signals can be shown as trader sentiment indicator or generated from computer systems.

2. Copy trading

Copy trading is where you replicate trades of other traders and echo their success. 

You have to choose the right copy trading platform and then identify a trader/strategy provider to follow based on their performance and other requisites of a profitable trader. It's highly recommended that you choose the best trading platform that will help you identify the best Forex trader to follow

If you're the one providing signals or strategies, the right copy trading platform also matters. Choose a platform that not only provides the best fee models but also helps you gain more followers. 

Here’s What You Need to Know about Copy Trading

3. Forums and profiles

Forums allow you to interact with other traders, sharing forecasts, strategies, tips, and tools in a more fun and entertaining manner. Profiles, on the other hand, help you get to know other traders better, especially those you follow or want to follow. 

Depending on the broker, forums can have thousands or more active users, providing you with a large pool of information source, while profiles are presented in detail, and may include a list of open and closed trades and the trading style the said trader prefers to use. 

Social trading helps simplify trading and investing for beginners while providing experienced traders with a platform to be known for their skills. Both parties earn while engaging in beneficial exchange and interaction among members, making it a better choice than social networks. 

When you start social trading, we highly recommend that you sign up for a platform with strict account controls so you can manage your account better.

 

Ready to grow your wealth in the world's largest financial market? No better place to start than right here with us! Begin trading with Fullerton Markets today by opening an account:

 

Open LIVE Account

 

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