Social trading is a new way for retail traders and investors to access the financial markets. It is based on the idea that the collective wisdom of thousands of traders is better than the wisdom of just one person. A social trading network connects traders around the world, enabling them to share their analyses of the financial markets – and their trades – in real-time.
The first social networks of traders were based on online information and the sharing of ideas between traders. Today, these networks don’t just feature the social aspect, they also provide automated trading. In other words, not only do these networks allow you to view, analyse and comment on the performances of real traders in real time, they also let you automatically copy their transactions. You can use this “social” information to make your own trades or you can decide to follow – and automatically copy – one or more traders in the social network (this is known as mirror trading).
A minority of traders manage to make a living on the forex market and you can find them through these social trading networks. These traders can open both long and short positions (of a forex currency pair, for example) and they can make money when the price goes up or down. Your performance is therefore not dependent on the general market trend (which is the case when you buy a share on the stock market), but on the experience of those who are providing the trading signals.
However, if YOU happen to be a good trader on your own, these social networks provide you with access to additional income through the sharing of your trades. The better your performance, the more investors will follow you, and the more commissions you will earn.
The following articles will guide you through the social trading landscape.
WARNING: social trading social involves the risk of losing money. Don’t get involved in social trading if you have financial difficulties, the idea is to only invest money that you can afford to lose.