Social trading refers to the merging of trading and social media.
Social trading is not just a way to connect with other traders to discuss the market or follow industry leaders. There are a number of ways to make money from social trading.
In this article, we’re going to show you exactly how to get started in social trading and how to work your way up.
Do Your Research
Social trading networks are similar to social media sites, except that instead of sharing updates of your personal life and the latest gossip, you’re sharing stats on your latest trades and discussing the market.
If you want to learn which are the best social trading platforms out there with a list of features and their specificities, you can use a resource like InvestinGoal whose site can be viewed here: https://investingoal.com/. They offer a range of useful guides to help you get started.
Take the time to get a grasp of the trading market. One of the greatest benefits of social trading is that you can connect with other traders. You can learn from the best, and you know they’re the best because of their stats.
The transparency of social trading sites helps you learn who has the best systems and who is bragging without actually generating the best returns. You should research the real returns good traders get in everything from commodities to stocks to Forex.
Follow a Leader
Another advantage of social trading is that you can learn while you earn. You can set up your account to copy the trades of successful traders. They’ll receive a modest payment in exchange for this information, but you’ll be able to piggyback on their success. A side benefit of setting up your account to copy the trades of a top performer is that you don’t have to babysit your account; the trader will buy and sell, and your account will automatically follow suit. The proportions are the same, though the value of your accounts clearly differs. If they invest 2% of their trading capital in X, 2% of yours will be invested in the same thing.
The social network side of social trading allows you to ask questions of leaders you are following, whether you want to learn why they’re making the trades they are or understand the current market. In general, you want to follow someone who has a good track record, matches your general investment strategy, and is responsive.
You should continue to study the actions of successful traders and learn more about your investment options. Note that you can change which traders you’re copying or take over your account whenever you like.
Have Realistic Expectations
Another reason so many people become disillusioned with social and copy trading is that they set their expectations too high. And this is partly because of how social trading is advertised. While it is true that social trading offers new traders a way to start making profits quick, you shouldn’t be too excited when looking at some of the top traders’ historical returns. While there are tons of ways that you can leverage your small initial investment and make big profits fast, the opposite can be true as well. So, make sure that you assess the risk behind any trade and don’t simply go by the trader’s track record.
You also have to be ready to put some effort into your trading as well. While the whole premise behind social and copy trading is sitting back and letting someone else take the wheel, doing some minimal research will allow you to minimise your risks. If you see any trader with a ROI of 400% or more, you should know that they’re probably using some very risky methods. Doing some basic research on the trader by looking at their trade history and comments should give you a clearer idea of what type of trader they are and if you should follow them.
And even if you find a great trader who’s had a successful run, it doesn’t mean that shouldn’t keep monitoring them. Different strategies might do better under certain market conditions, and a down or upturn in the economy or in a particular sector could have a direct effect on how they perform. You also have to remember that these traders are human as well, and many traders have been known to take some extra risk after a run of bad trades, blowing out their accounts as a result.
So, it’s your responsibility to always take market conditions into consideration and learn how to do basic market analysis on your own before you start with social or copy trading.
Take It to the Next Level
As you learn, you can make trades on your own instead of copying those of others. If you do particularly well, social trading gives you a unique way to earn money – by being copied by other investors. Then you not only earn money through trading but by sharing your expertise with less experienced traders.
Depending on the platform, you could be paid based on the number of followers or copiers you have. This can generate a nice supplementary income, whether they’re copying your trades or reading the advice you post on the social trading site.
Social trading is an excellent way to truly earn while you learn. And it is unique in providing ways for good traders to profit from their expertise aside from the returns they earn in their accounts.
This is a guest contribution by Jenna Hilton.