Social Trading: What is it and How to Start?
A social trader
The internet and other technological advancements have revolutionized the world. You can connect with friends and family members living across the globe with a few clicks on your smartphone. Technology like social media has changed how people communicate and interact with each other. However, that’s not all. Technology has also changed how people work. For instance, remote work continues to growin popularity exponentially, particularly after the global COVID 19 pandemic. The world is becoming increasingly digitalized, and no profession, sector, or industry has been spared by technological disruption.
Given that technology has dramatically altered your personal and professional life, it only makes sense that technology would also affect your finances. For instance, all you have to do is log in to one of your social media accounts, and you’ll see a ton of advertisements for investment applications, financial services, online trading platforms, and more.
As a result, you might have also heard the term social trading tossed around nonchalantly by one of your online friends or perhaps someone you follow.
What is Social Trading?
Social trading is a trading strategy or approach that deviates from traditional trading. Traders generally were always secretive about their trading methods and strategies. They wouldn’t disclose information to others because they didn’t want their success replicated. However, the internet and social media have changed that notion completely. These technologies have facilitated information exchange to unprecedented levels, meaning traders have realized the benefits of sharing their ideas and strategies with other traders. Doing so helps them learn new tricks and techniques from others while also earning, resulting in mutual benefits.
The social trading approach began during the early 2000s. Initially, social trading occurred via newsletters and mailing lists. Eventually, it moved to chat rooms. Today, you’ll find dedicated social trading platforms that facilitate social trading.
However, this still doesn’t answer your question: what is social trading? Social trading enables you to follow seasoned traders and copy them, allowing you to learn and earn simultaneously. Social trading is an excellent option for beginner traders who aren’t familiar with trading strategies and opportunities.
Components of Social Trading
Social Trading includes several components, including the following:
· The Market: Social trading is prominent in most markets. Although you’ll find most social trading platforms are geared towards forex, some exist for cryptocurrency, stocks, and other financial instruments.
· The Broker: A broker is necessary for supporting your financial trading.
· The Signal Provider: The signal provider is the seasoned trader you’re going to follow and copy. You’ll be basing your strategies on their trades.
· The Follower: If you’re a new trader, you’re the follower. That’s because you’ll be learning from watching and emulating other experienced traders.
· The Social Trading Platform: Ideally, you’ll want a trading platform that supports social and copy trading. Crystal Ball Markets is the ideal trading platform for you. Our Mobius Trader 7 platform is designed to facilitate social and copy trading.
How Does Social Trading Work?
The social trading components we discussed above play a crucial role in ensuring social trading works. Social trading behaves like a well-oiled machine. Each component must play its part to ensure social trading continues and benefits everyone involved.
Typically, social trading is quite straightforward. You’ll sign up to a social trading platform like Crystal Ball Markets, where you’ll find numerous experienced and professional traders sharing their trading positions. All you have to do is click on their profile and view their trading activity and returns. You’ll see details of their strategies. In addition, you can also view their historical performance and, in most instances, their risk level. Checking historical performance and risk level is crucial. You don’t want to emulate a professional trader with poor historical performance or someone operating at a much higher risk level than your risk tolerance.
A social trader assessing a signal setter’s historical performance
Why Social Trading?
If you’re still unsure about social trading, consider the numerous advantages and benefits it provides, including the following:
Diversified Strategies
Individual trading has its advantages. However, you only have so much time and resources to exhaust. Eventually, you’re going to reach a point where trying out new strategies might become unfeasible because of the required learning curve. Simply put, you can’t possibly explore all strategies and outcomes yourself. You’ll require assistance, and that’s where social trading thrives. Social trading enables you to share ideas and strategies with other traders. You might learn about strategies you didn’t know existed. As a result, social trading helps equip you with diversified strategies.
Collective Trading Knowledge
There’s only so much time in a day for you to learn about trading. Generally, when a group of people gets together, they share ideas and thoughts. This information exchange is beneficial because it helps expand your knowledge. You learn a little about trading strategies from each trader. Even if you don’t learn new strategies, you might learn how other traders think and view the market. As a result, you’ll gain useful first-hand insights that you could use in your trading endeavors.
Social traders sharing knowledge
Reliable and Accessible Information
You’ll find heaps of information online. All you have to do is perform a quick Google search. However, what percentage of this information is reliable? Social trading provides you with reliable and accessible information at your fingertips. You can learn how different traders assess asset classes before investing. You might learn new parameters to consider when searching for a trading opportunity on a particular financial instrument. The best part is you get invaluable information from a single source – your social trading platform.
Learning From Examples
Social trading is excellent for beginners for several reasons. Not only does social trading enable you to earn while learning, but it also gives you real-life examples. Since you’re copying another trader’s strategies, you’ll learn how different strategies work in different segments. For instance, one particular strategy might be useful for trading energy commodities, but it might prove unfruitful when trading agricultural commodities. As a result, social trading also helps expedite your learning, lowering the learning curve.
Social Trading
Start Social Trading with Crystal Ball Markets
Whether you’re looking to start trading currencies, shares, or cryptocurrencies, you’ll need a top online trading platform. Although numerous online investment platforms exist, not all are equal. Crystal Ball Markets is one of the best social trading platforms around. Visit our website to learn more. Alternatively, register with us today to get started.