How To Forge Your Trading Strategy With Social Trading.

The Secret of Social Trading

Are you looking for that winning strategy in online trading? Before you put any of your hard earned money at risk, take a look at social trading.

The secret of social trading is the fact that there are actually no secrets. When you look at a social trading platform such as eToro, the whole idea of social trading is transparency (eToro is a global platform, but not available in the U.S.A.). Traders communicate with each other, share information about trading strategies, and what to expect from the markets.

You have to take note of many things before you start to trade online. Keep in mind that these points are

already tried and tested by those who came before you. They already understand the principles and strategies to achieve success with online trading, and you can greatly benefit from the knowledge and expertise of these people.

You Don’t Have To Be A Wall Street Specialist To Be Successful with Social Trading.

Social trading platforms (such as eToro) give you the opportunity to follow expert traders and copy what they do. This is a tremendous advantage to you. It will increase your chances at success while you are actually learning.  

I would, however, recommend you start your trading on a demo account. This will allow you to follow and copy various traders while you are investigating their strategies. See what risk levels they are trading with, how frequently are they trading and how profitable are they.

Once you have filtered out your favorite traders, you can copy them in your real account. You can either copy a trader’s whole portfolio, or you can copy single trades.

If you copy the whole portfolio, everything that happens in his/her account, will happen pro-rata in your own account. If you copy a trader with $100.00, and he/she opens a trade with 2% of his trading account, a trade in your account will open to the value of $2.00 (2% of the $100.00). Whatever that trader does to manage that trade, up until closing that trade, will be replicated in your own account.

If you copy single trades, you have more control over the amount per trade. It is important to realize that if the trader adds any funds to that particular trade though, that the same would not happen on your trade. The reason for this is that there is no additional money allocated for that trader on that specific trade. Adding funds to that trade or moving stop losses would increase your risk. Other than that, everything will be the same. Whenever the trader closes that trade, your trade will automatically be closed as well.

While you copy your favorite traders in your real account and you familiarize yourself with their strategies, you can start practicing to do your own trades in your demo account.

If you prefer to continue copying expert traders, that’s fine. But if you want to experience the satisfaction of executing your own profitable trades, social trading is an excellent way to gain experience and learn from expert traders.

Once you have mastered your own strategy, and you are doing your own trades, other people can start to follow and copy you. Social trading is an excellent way to make new friends in the trading community.

Various Types Of Traders – Which Group Are You In?

Your social trading platform should give you the option to filter traders. This enables you to find traders to suit your own personality and trading style.

·         Aggressive / High Risk: These traders like taking risks. They are often fast traders (in and out of trades within minutes). They also might go for longer trades, but use high leverage to gain maximum profit. They enjoy huge profits, and they want it fast. Sounds like fun? Remember, with this type of trading, when things don’t work out according to plan, you also lose big, very quickly.

·         Low to Medium Risk: These traders are more conservative and cautious. They will be slower in making profit (or take less profit per trade), but they are more consistent in making profit.

·         Frequent Traders: These are normally intraday traders (not staying in a trade for longer than a day), and they often enter into trades.

·         High Profit Traders: These might be traders who don’t trade that often. Seeing that they aren't high risk traders, they might sometimes hold trades for days, weeks or even months before closing their trades, but they often show good profits.

Discipline

Even if you do start to follow or copy some expert traders, you still need to have discipline. Analyze and study various traders. Follow them and copy them first in a demo account. Be sure that you are comfortable with their strategy and trading style before you copy a trader in your real account. Then make sure that you are still actively involved and keep an eye on your trades. Social trading is not just a lazy, easy way of making money. The expectation of being able to copy a trader and then stop paying attention (going on holiday for example) is unrealistic – traders like these could come back to find that they have lost money, and then want to start screaming at the trader they copied.

Remember, as mentioned earlier, you can either copy the full portfolio of a trader, or manually copy single trades. In both instances, whenever you are not happy with any particular trade, you can cancel the link to that particular trade, and take control of the trade. You still need to take responsibility for every trade, even if you copy.

How Do You Benefit From Social Trading?

Let’s talk about how you benefit from social trading in the comments below.

What is Social Investing All About?

Many people are keen to invest their money and get their money to work for them, but the lack the know-how. Social investment is an excellent way to solve this problem.

Whether you are an experienced investor or a complete novice, a social investment network will allow you to track the decisions of other users and copy those exact same transactions.

Don’t be fooled though, you still need to do your homework and study the strategy and profitability of each trader instead of just blindly starting to follow a trader. A social investment network such as eToro makes it easy to gather all the information you need with regards to different traders before you come to your final decision. You can choose trader according to profitability, the level of risk they take, frequency of trading and much more. There is always risk always risk involved in any trading, so it is important to investigate properly, as this will mean the difference between healthy profits or losing money.

When you decide on your favourite trader, you can follow him to see all his activities by clicking on the “Follow” option in his profile. Once you are satisfied with his activities, you can click on the “Copy” option in his profile. This means that every transaction will be copied in proportion. If you allocate $ 100.00 to that trader, and he opens a transaction with 10% of his trading capital, 10% of your $ 100.00 will copy that exact same transaction. Whenever he opens a trade, that trade will be copied in your account, and when he closes the trade, the same will happen in your account. If you don’t want to copy the whole profile of the trader, you can also copy single trades.   

The idea of a social investment network is that it allows users to invest in a fully transparent and engaging community by sharing and copying from one another.