Social Trading: What It Is, How It Works And What Are The Advantages

In recent years we have been witnessing the rapid rise of Social Trading, thanks to the media explosion of this completely digital financial phenomenon expert traders and the huge investments made by large companies in the sector.

This relatively new investment method on the market has allowed many people to approach the world of trading. We will see later the reasons that make this system easier for a first approach than the classic platforms. However, as it happens throughout the economic and financial, great skills are needed as well as a great willpower and patience. In fact, time plays a fundamental role in the formation of a good trader.

Social Trading: what it is and how it works

Social Trading, as the name suggests, is a modern method of investment that is based on the community, specifically a group of traders gather at Forex social trading platforms to exchange information and anecdotes of the trade useful for making the right moves in the complex financial world.

It was strongly supported by the most important brokers in the world with the aim of simplifying entry into the financial markets for all new traders or for those who still have little experience in the sector.

Until a fairly recent past, investors and traders based their calculations and their choices only on market analysis and fundamental techniques, while with the advent of Social Trading, they can also use the data shared by other users of the community and therefore also their analysis and their feeds in order to have more methods of comparison.

The fundamental bases on which Social Trading is based are the following:

• The flow of data and information relating to the financial markets: the sharing of data and information is totally free and without any kind of constraint or restriction.
• Cooperative trading methods: unlike other trading methods, collaboration and teamwork are very important in order to achieve an excellent level of knowledge of the financial markets; this is certainly an important factor in the long term to reduce the losses or wrong financial choices.
• Faster Growth: Thanks to the continuous increase in the flow of traders and investments, you can grow faster as a trader by testing and observing the techniques of other traders. Through direct experience, it is possible to grasp strategies and mistakes not to be repeated.
• Transparency of the actions carried out and data security: the data received and/or exchanged between the various traders enjoy a high level of security that preserves the identity of the traders, avoiding exposure to IT dangers and fraud.

Who is Social Trading suitable for?

We have said that thanks to a social platform, it is possible to receive advice, analysis, and ideas from other traders with whom to compare. In this way, every trader can validate or refute their analysis, but not only, but social trading is also, in fact, ideal for:

• those who are at the first experiences of online trading and, although they have done training courses, they have never been able to put the technical notions into practice. In this way, he can both start investing by profiling the most experienced traders to follow and refine his knowledge and techniques, even by intervening in discussions;
• those who have been trading for some time but want to compare their analyzes with those of a community of traders, some of them with more experience;
• those who want to expand their network of acquaintances and not limit themselves to solitary work with their computer, numerous graphics, and numbers, in this way have the opportunity to meet many “colleagues”;
• those who do not have time to dedicate to the study of charts and analysis and want to invest their money following the example of expert traders;
• those who want to take advantage of the competition created by social trading platforms that leads the best traders to always want to give their best, not only for their portfolio but also to be considered the best on that platform.

The advantages of Social Trading

The main advantages of social trading are as follows:

• Information easily accessible even by beginners in the sector: any platform specializing in this trading methodology contains a boundless amount of data and information verified and therefore completely safe and reliable. By sharing data, any trader can benefit from performing the best actions;
• Group work: trading in small or large groups allows you to make investments by establishing professional relationships that can help you develop;
• Ability to follow diversified and customized strategies: in this case, too, the community you rely on is fundamental. Each component can suggest their own market strategies, and all the others can improve them until the best possible result is achieved;
• Reduced initial costs and investments: in social trading platforms, it is not necessary to invest large amounts of money immediately. In fact, it will not take much to enter the financial markets.
• Ability to learn directly from professional traders: within the various platforms, it is often possible to collaborate with experienced traders who have been operating in the sector for several years. In this way, you have the opportunity to work closely with real financial gurus and to learn from their every single move or advice;
• Possibility of joining a financial community and climbing hierarchies: through your talent, it will be possible to establish yourself in the huge world of trading and to enjoy ever greater trust and respect
• Facilitated risk management: through the sharing of data and information, it is possible to understand the various levels of risk of the open operations in order to accurately evaluate the next actions.

How much can you earn with Social Trading?

The gains that can be obtained through investments in social trading platforms are variable and strongly depend on your level of experience and that of the traders you choose to “follow.”

The key to success in the financial field is certainly the careful and rational analysis of all the data with which you are dealing. For this reason, before starting copy trading, the advice is to create your own wealth of knowledge that allows you to understand what you are doing and whether the analyzes made by other traders are correct or not. To get started, you can start with the best trading books that we recommend to all our readers.

It is essential to understand the laws that govern international markets and the graphs that describe their progress.

Risk is a very important trader for every trader, but if you want to start copy trading, be careful not to overdo it, especially if you are inexperienced.

Most people who try Social Trading lose their money for several reasons:

• Wrong choice of traders to follow;
• Poor portfolio management;
• Lack of knowledge.

However, Social Trading certainly offers an opportunity that did not exist until a few years ago, namely the possibility of avoiding senseless operations by comparing one’s studies with those made by other traders. This is a huge advantage that can certainly increase the chances of success. Be wary of anyone who tells you that with Social Trading, it is easy to make money.