In today's world, social networks can no longer be ignored. Almost everyone maintains contact with their friends and family via Facebook or similar; manages his career via LinkedIn; and shares his ideas with the world via Twitter.
Meanwhile plays ' social networking ' a role in forex. And there it is called ' social trading'.
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.
In social trading, forex investors are connected through a social network. This way you can share your own investment strategy with others and get valuable feedback. You can view the strategy of other investors and, if you wish, transfer it to your own forex trading system. You can even copy the investment choices of successful forex traders directly, without having to make intermediate decisions yourself.
At the time of writing this article, social trading is still on the rise. The only forex broker that completely specialises in social trading here is eToro ( review ).
But we expect that social trading will gain in popularity in the near future and that more and more brokers will support this form of social investing.
Social trading at eToro works through proprietary software. You can find it via the eToro homepage (no installation required). If you already have an investment account (English: 'trading account') with forex broker eToro, you can log in directly with your username and password.
On the eToro homepage, you will see a constantly updated newsfeed showing the investment decisions of other traders. To the right of the homepage you will see the most successful traders of the past months. If you click on the name of a trader, you will see which positions this person has taken recently and what the result (in percentages) has been.
On the page of a forex trader you can also see how many people are following this person. If a trader has many followers, it is a sign of success: many other traders are confident in his decisions. By clicking on the '+ Follow' button, you can also start following this trader yourself.
If you then look at 'Watch List' on the homepage, you will only see the positions that have been opened by the people you are following. This way you can build a collection of successful investors whose decisions you want to keep an eye on. If you see a position that appeals to you, you can immediately take this position yourself by clicking on 'Copy' (you must be logged in to the Webtrader for this).
You can go even further than copying individual decisions you see in the OpenBook newsfeed. You can also copy the complete investment strategy of another trader. To do this, go to the trader's profile page and click on the '+ Copy' button. You can then indicate which amount (or percentage) on your account you want to make available for copying the trader.
It does not matter how big the positions are that the copied trader himself takes. Your positions are adjusted proportionally to the amount that you make available yourself. Then you don't have to do anything: eToro automatically opens and closes the positions that the copied trader opens and closes for you.
It wise to blindly follow another trader? We would like to give a word of caution on this. When you first see a trader's profile, you will not know what strategy he or she uses and why his investment decisions are or are not successful. It may simply be that this trader has been lucky a few times.
We therefore recommend that you, before copying a trader, follow and try to understand the decisions of this person for a while.
You can also ask questions to the trader via the trading feed. Only when you are convinced that this is someone who makes wise decisions, whose strategy and risk profile are in line with your own preferences, then it is a good idea to copy this person. In any case, we would advise against copying one trader with your entire investment account.
Spread your risk and make only part of your capital available for copying one person.
Finally, we attach great value to learning to invest in forex. (For example, there is our free forex course.) If you copy someone else's decisions without thinking about it yourself, you will not learn. It may yield nice profits, but you will never be able to invest so successfully (or even more successfully) this way.
We therefore recommend that you use social trading primarily to study and learn from the decisions of others. In this way it will earn you money, but you will also become better at forex trading.