Why are People Flocking to Social Trading Platforms?

by Darwin on April 27, 2017

Traditional trading options are rather bland in the sense that the client does not typically engage with the pulse of the market, a.k.a. other traders when buying and selling underlying financial instruments. The rapid rise in the popularity of social trading has been facilitated by non-bank investment and trading platforms.

These platforms have revolutionized the online trading industry, creating a new normal that traders now expect from their online brokers. For starters, social trading is about benefiting from the knowledge and success of fellow traders. In essence, social trading is predicated on user-generated data. Other resources bolster this information such as trading apps, newsfeeds, interactive charts, and increased levels of engagement between traders.

Copy Other Traders Instantly

With social trading, it’s the power of community-based trading that determines the success of individual traders. Traders are able to see what other traders are doing in real time, copy their trades, and piggyback off their successes. Powerful trading platforms make it possible to instantly determine which traders are successful in a social trading set up. This facilitates quick and easy identification of traders for others to copy.

Naturally, the most successful traders are those with the requisite knowledge and understanding of the financial markets and the individual financial instruments. The ability to instantly copy another trader’s actions, investments and financial portfolio is part of the social trading experience.

Leading Social Trading Brokers

Experts routinely conduct analysis of the leading social trading platforms, and eToro Reviews are consistently positive. In fact, of the approximately 124 million trades conducted, this social trading network boasts a success rate of 80% +. By engaging in social trading, it is easy to be a follower or a leader with currencies, commodities, indices, and stocks trading. The benefits of engaging in social trading extend beyond the profits that can be generated.

For starters, social trading has proven to be a reliable way of dabbling in the financial markets. Provided the social trading platform is fully licensed and regulated, traders are secure in their daily trades. Further, social trading offers full transparency and diversity. All aspects of a trader’s financial portfolio are available, including profit/loss, open positions etc. Things like a trader’s individual track record, even their Risk Score are available to all other traders in a social trading set up. Traders can also allocate resources to copying multiple traders.

Successful Social Trading Strategies

Social trading strategies depend on the type of trades, and underlying financial instruments in question. On the surface of it, it is possible to use an investment strategy that focuses on a successful trader. Of course, it’s foolhardy to put all your proverbial eggs into one basket, so other traders routinely spread their risk across multiple traders. eToro offers a unique feature known as a Risk Score. Short-term investment options and long-term investment options are both possible with social trading.

Fortunately, it’s not simply blind copying of other traders’ activity that characterizes the social trading scene – educational resources are available to understand the logic behind these decision-making processes. Another useful option is demo trading accounts. These provide traders with faux trading money to dabble in the financial markets under real market conditions. With leading social trading platforms, there is always ongoing innovation taking place. Typically, complex algorithms govern the trading functionality with social trading, but from a user side it’s as easy as clicking and trading.

With social trading, all the monotony of traditional bricks and mortar trading disappears. It’s all about capturing the pulse of the market and acting on overall trader sentiment.

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