A term that has been used more and more frequently in connection with Forex trading over the past two years is copy trading.
Read MoreForex Copy Trading
Pros and Cons of Forex Social Trading
About
Social Trading for a new generation of Forex Traders
Since the end of 2014, there has been an explosively growing number of traders engaged in Social Trading.
How does Social Trading work?
Trading is done in the same way as with brokers such as Pepperstone. You select a currency, set a volume, choose a stop-loss and take-profit and place your trade. You can do this based on your own expectations, but you can also choose to follow the trading pattern of another trader. In that case, you choose to place your trade as a follower and the rest will happen automatically.
With Social Trading you can just stop your trade when you think the price is turning against you or you wait and see what the trader you are following is going to do. So you partly outsource trading. Hopefully with the result that the trader you have chosen makes the right decisions.
View other traders
The most specific characteristics of social media can also be found in social trading: you can follow other traders and others can also follow you. That way you learn from each other and you can easily keep up to date with what is going on in the world of Forex trading.
Other traders follow
Besides watching other traders, you can also follow them, or rather: follow their trades. You can do this by just keeping an eye on them, but eToro also offers the unique opportunity to automatically trade with other successful traders.
Automatically copy other traders
If you see a trader who is doing very well, you reserve an amount of your trade balance for this trader and you automatically follow the trades he or she places. In addition to viewing, tracking and automatic trading, you can also connect with other traders by sending them a personal message through their profile page. You can stop and adjust your copied trade at any time and of course decide to stop following a particular trader.
Benefits Social Trading
I think the biggest advantage of social trading is that you get the hang of Forex trading much faster and easier. In addition, you automatically collect the most relevant current information that can be important when placing your trades. An economic calendar is still useful, but via social trading trend changes, news items and special events will reach you much faster.
Disadvantages Social Trading
Many experienced Forex traders look a bit down on social trading. They believe that social trading is no longer about the art of trading, but that social activities play too great a role and this increases the risk that wrong choices are made.
Although there is certainly something to be said for the argument that social trading is no longer just about trading, I think that this way of trading can help young, starting traders in particular to develop their trading skills enormously. I even think that in the coming years there will be a division between Social traders and the established way of trading.
Social trading will offer more opportunities, more tools will become available and no doubt new strategies will also be developed. Social trading has arrived and will play an increasingly important role in the Forex world.
Since the end of 2014, there has been an explosively growing number of traders engaged in Social Trading.
How does Social Trading work?
Trading is done in the same way as with brokers such as Pepperstone. You select a currency, set a volume, choose a stop-loss and take-profit and place your trade. You can do this based on your own expectations, but you can also choose to follow the trading pattern of another trader. In that case, you choose to place your trade as a follower and the rest will happen automatically.
With Social Trading you can just stop your trade when you think the price is turning against you or you wait and see what the trader you are following is going to do. So you partly outsource trading. Hopefully with the result that the trader you have chosen makes the right decisions.
View other traders
The most specific characteristics of social media can also be found in social trading: you can follow other traders and others can also follow you. That way you learn from each other and you can easily keep up to date with what is going on in the world of Forex trading.
Other traders follow
Besides watching other traders, you can also follow them, or rather: follow their trades. You can do this by just keeping an eye on them, but eToro also offers the unique opportunity to automatically trade with other successful traders.
Automatically copy other traders
If you see a trader who is doing very well, you reserve an amount of your trade balance for this trader and you automatically follow the trades he or she places. In addition to viewing, tracking and automatic trading, you can also connect with other traders by sending them a personal message through their profile page. You can stop and adjust your copied trade at any time and of course decide to stop following a particular trader.
Benefits Social Trading
I think the biggest advantage of social trading is that you get the hang of Forex trading much faster and easier. In addition, you automatically collect the most relevant current information that can be important when placing your trades. An economic calendar is still useful, but via social trading trend changes, news items and special events will reach you much faster.
Disadvantages Social Trading
Many experienced Forex traders look a bit down on social trading. They believe that social trading is no longer about the art of trading, but that social activities play too great a role and this increases the risk that wrong choices are made.
Although there is certainly something to be said for the argument that social trading is no longer just about trading, I think that this way of trading can help young, starting traders in particular to develop their trading skills enormously. I even think that in the coming years there will be a division between Social traders and the established way of trading.
Social trading will offer more opportunities, more tools will become available and no doubt new strategies will also be developed. Social trading has arrived and will play an increasingly important role in the Forex world.
Blog
The idea behind social trading in forex is actually quite simple. All forex investors have the same goal: to accurately predict the currency markets and identify opportunities for interesting positions. You can do that on your own, with your own forex trading system, but you can also enlist the help of other investors.
Read MoreSocial trading is also called copy trading. More and more traders are using this way of trading. It gives small and intermediate traders the ability to track successful traders and copy their positions.
Read MoreCopy Trading is rapidly conquering a good slice of the online trading sector, being implemented with various facets in more and more platforms.
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The process of copying traders
1. If the signal provider / popular investor opens a new trade, his broker will send the data of this trade to the platform.
2. The trading platform receives data about the new trade and verifies who the investors are who copy the signal provider. It then checks their personal settings for copying the selected trader.
3. The platform then sends each investor details about opening a new trade, but adjusts it according to the client's specific settings.
4. It then opens in the customer's trading account to trade.
This process is done automatically, and even more so, in a few tenths of a second!
Who are the signal providers and followers?
The process of copying trades begins with the so-called signal provider.
For some brokers, we may encounter the term strategy manager or popular investor. He is a trader who has created a trading system according to which he trades himself and allows other investors to replicate their investments.
A follower is an investor who copies the trades of the strategy provider or popular investor.
Copy trading platform
Copy traders are enabled by the platform. Each platform contains basic and additional functions. On each platform, you will find your profile, in which you can monitor the development of your investments. You will find a list of investors/strategy providers in the platform for copying traders. After clicking on the strategy provider's profile, you will see your business history and other statistics.
A quality platform also contains all popular options deposit and withdrawal of money. You can also install many platforms on your smartphone or tablet. This way, you can find out the status of your investments at any time and analyse how the selected popular investors are doing.
Some platforms also allow traders to place an order Stop Loss, which allows traders to control the risk of copying traders.
Getting started copying traders?
Getting started is very easy. Let's take a look at the steps together:
1. Create a trading account with a broker
2. Deposit funds to your broker account
3. Choose the trader or investor you want to follow
4. Choose the amount to invest
5. Click the copy button
6. Depending on the platform's features, you can also set a protective Stop Loss instruction and other settings
Quality brokers for copying traders
Copying traders is becoming an increasingly popular service. Many companies are aware of this and are starting to provide this unique investment service.
How to choose an investor who pays to copy?
Every strategy manager or popular investor uses a different trading strategy, trades different financial instruments and uses different methods of money management. There are a really large number of these categories, and it's up to you to track and mirror traders.
It is very flexible and can be used for many investment strategies.
Each investor has his own goal and tolerance for risk. As the right follower and investor when copying traders, you need to set some realistic goals that you want to achieve by trading. You need to analyse your intentions, be aware of the risk and manage it effectively.
In our experience, it is appropriate to When choosing a popular investor, follow these points:
1. Trading time - First, notice how long this investor has been trading. It is safer to follow a trader who has been trading on the stock exchange for more than 1 year.
2. Trading instruments - It is very flexible and you can follow investors with different investment strategies. It is advisable to diversify your portfolio with popular investors who trade various financial instruments. For example, I decide to copy three popular investors/strategy providers. The first investor trades currency pairs, the second trades commodities and the third invests in shares.
3. Risk Reward Ratio (RRR) - This figure represents the risk-to-profit ratio. The statistically most robust RRR is the 1: 1 risk-to-profit ratio.
4. Drawdown - Note the data on the largest decrease in capital (drawdown) in a certain period (1 year, 2 years, or throughout the period). This information will show you how the investor manages the risk in adverse situations. This drawdown shouldn't exceed more than 15% per year. As a rule of thumb, the lower the drawdown, the more likely you are to make a profit by copying the trader.
5. Number of followers - represents the social aspect and the popularity of the investor. It is certainly not necessary to rely only on this single point, but it can point us to the fact that how many followers trust and copy the popular investor. In most cases, this means that he is a popular investor with a wealth of experience who is profitable in the long run.
Fees for copying traders
As we explained earlier, when following traders, you replicate the investor's trades to your trading account. For example, if a popular investor invests 2% of their capital in buying shares, you will automatically buy the same in your account shares worth 2% of your trading account.
In this process, you pay the same fees as if you were trading. So when copying traders, you can pay a fee for the execution of the transaction, part of the spread or you can pay a fee for transferring the open trading position to the next day (swap).
In some companies, you may pay one of these fees:
* Entry fee - this fee is charged at the beginning of the merchant's/strategy provider's copy process
* Performance fee - is paid only from the profit that the follower made by copying the merchant
* Management fee - this fee represents a reward for the provider's strategy for "managing" the funds of followers
Conclusion
It is a great service for beginning marketers. It will allow you to enter the sometimes dreaded world of finance and potentially make some profits. Even with losses, copying traders protect you from losing all of your capital (as long as you copy quality strategy providers). Although mirror trading does not provide any guarantees, it is an ideal way to start investing.
This form of investing offers a unique solution for people who want to invest their money, but don't have enough time or experience to invest. Replicating traders thus allows you to use the knowledge of more experienced investors.
Knowing how to invest well requires certain knowledge and experience, which each investor will gain through their own studies and practice. So why not entrust your investment to someone familiar with the trading world from the beginning? And that's exactly what copy trading is all about.
