April 16, 2018
Internet has caused a revolution in sharing information and knowledge, which was previously unattainable. The lines between professionally trained and dexterity acquired online has blurred. People from all around the globe can learn and become proficient in fields, which were formerly the domain of professionals. Stock market is also one field, which was limited to professional brokers but now everyone can gain access.
Social media power and crowd wisdom has added a totally new facet to trading. It depends on different traders, who share their experience, wisdom and trading practices.
Social trading is a rapidly escalating trend on stock, Forex, and other markets. There are still several traders, who wonder, ‘what is social trading network?’ or ‘how social trading works?’ If you fall in this category or have never tried social trading then it is obvious to feel nervous. You are unsure whether this activity is worth your time or not.
What is social trading network?
Social media is used a lot in decision making. Consumers are making use of brands and recommendations from their networking pages. Trading is no different. Social trading gives traders unique opportunities to gain information about market conditions from other interested traders. Provided data can be used to trade on your own or in collaboration with interested traders.
The foundation of social trading is social networking. For example, Facebook keeps you connected with family and friends, all the time. Similarly, social trading network offers a nurturing environment to novice and experienced traders. They exchange information, ideas, techniques, and strategies. For example, you can get crowd sourced information regarding the RDSB share price today.
The key difference between social network and social trading is that the latter concentrates on trading rather than social aspect of your online and offline activities. Unlike Facebook, your profile on social trading network is as a trader and not as a person.
On the majority of platforms, accountholders can easily check an investor’s portfolio to review if they are successful, what their niche is, or how much they earned in the past. Social trading enables a free flow of data across the network just like Twitter or Facebook feeds allow you to know what your friends are up to.
Trading sites keep you updated about what fellow traders are trading or investing in. Vital information is often shared, which help readers to make informed decisions on basis of that feedback.
Be careful, because just like Facebook everything shared may not be true or if it is spot on you may misinterpret the data. So, it is crucial to check the trader’s portfolio, prior you listen to his/her recommendation.
Following a trader
You can follow a trader’s moves and comments, if you think the trader is often right. Learning from what you can see in action is more preferable. You can even ask, if you find a trade move, which seems complex. Therefore choose to follow a trader, who interacts with community.
In this way, you can learn faster than you generally would on your own. However, if the community is vast then your questions won’t be answered. There is a huge difference between traders who at least make an effort to be supportive in comparison to those who share information and don’t follow-up or respond.
Benefits of social trading
Good information is vital for making wise investment decisions. Charts, graphs, and analysis are some strategies that have been used for decades. Social aspect adds another information aspect for online traders. The current trading platforms have integrated social media elements like direct interaction and newsfeed.
Online traders get a chance to communicate their experiences and perception as well as gain a lot from each others skills. More specific data received from fellow traders blended with your personal touch can contribute to improved security sense, while making a trade decision.
Checking the portfolio, track records and risk factors of every trader is helpful, when you desire to tweak your personal trading style. You can gain ideas from other investor’s trading habits with respect to trading tactics, popular assets, and portfolio diversification.
The transparency element helps psychologically to be more cautious and decrease risk, while making trade decisions. Some platforms allow copying other investors and rewarding traders with many copiers. To gain more followers and earn money, traders need to create low-risk strategies for their copiers.
It is a safe mentality to not put every egg in a single basket. It applies to trading practice. Diversifying a portfolio empowers traders to reduce their risk. It is a simple logic. You invested in four to five assets. Out of these a couple brought loss but you will not lose everything.
Diversification also needs skills and time to gain the proficiency. Each and every asset’s charts and graphs need to be organized and analysed well, before making a decision. Access to fellow trader’s portfolio allows you to read their posts regarding the reasons of their trade decisions in a specific asset/s. It helps to select proper assets including less familiar ones.
The online trading world is automated including features like ‘take profit’ and ‘stop loss’, which did not exist before internet revolution. For decision making there is no automation, it has to be done on your own. However, with copy the trader feature, people with lack of experience and time can get attached with another investor’s portfolio.
Social trading is advantageous to everyone
Social trading is advantageous to successful traders who can earn more passive income from selling their trade signals. Inexperienced traders get an opportunity to follow signal providers in real time at a small fee. Signal provider’s trades get disclosed automatically, so losses cannot be concealed from the public.
Sunil Gupta is the founder of ACG Digital Marketing a digital marketing company. All his articles are designed to empower the reader with the latest tools and trends in the world of digital marketing. In his spare time, Sunil loves fishing and playing online games.