Until the rise of the Internet, only bankers and large institutions could trade Forex. An individual could trade only if he had a few million dollars! Nevertheless, because of the rise of the Internet, online Forex trading brokers are now able to offer trading accounts to retail traders.
Social trading allows everyone to trade online with the help of other traders & investors. Users can interact with traders, watch them take trades, then copy their trades. Over time, by copying traders, users can learn which strategies work and which do not work. Social trading connects traders with investors and at the same time enable traders to share their knowledge. Social Trading Platforms bridged the gap between useful information in markets and trade execution by converting the advice of traders to a service which can execute trades.
Social trading (or Copy Trading) has increased the participation in the market and led to a greater volume of trades as brokers see new growth opportunities for converting new and retaining old clients.
How It Works
Retail investors link their broker accounts with traders. When a trader makes a trade, the same trade is executed in the investor’s account. Investors can trawl the hundreds of traders, examining their performance, trading style, rating, what other investors think of the trader’s performance, etc. and choose the appropriate ones for their portfolio.
You don’t have to learn or watch the market to make a good trade because traders from all over the world are doing it for you!
Is It Free?
Registration and use is free. Most of the automated trading networks charge you only with the broker’s spread for each trade executed (a few pips). For further details, please refer to each network’s pricing policy.
Can You Make Money With Social Trading?
Yes, it is possible to actually gain profits with automated trading. Is it easy? No, you need to find the profitable, stable, reliable traders and adjust your account settings properly (money and risk management). Then, you have to monitor your traders because you never know when they might change their strategy, start to over-trade, lose a great amount of your money, etc.
Do You Need Trading Knowledge?
No, but you should at least learn and understand Forex fundamentals.
Open demo accounts to the trading networks you prefer the most. Navigate and become familiar with the user interface and the features they provide. Invest the same amount you are going to use later in a real account and devote a few months to see how it goes. See our Homepage for help.
Read and learn about the basic trading terms. You don’t have to become an expert, but it’s important if you want to be able to distinguish the professionals (analyze their performance, trading tactics, strategy, etc.).
Pick your traders very carefully. Read their profiles and strategies thoroughly (followers sum, ratings, trading history, trading statistics, etc.). Follow traders with a long trading history that have delivered consistent results. Even though it is easy to pick the profitable ones at any point in time to boast the potential returns, you should not expect that your performance can be always good since draw-downs are part of every system and systems have their ups and downs. In other words, the best traders today will probably not be the best systems the next months or years. See the How to Choose Traders page for further details.
Draw-down and slippage are very important trading parameters. Always check them before analyzing the performance of a trader. See if your account balance can withstand traders’ draw-down. If not, then there is a possibility to lose a great amount or all of your money. Look at the historical draw-down of the trader and bare in mind that this trader will most likely experience the same, and more, draw-down. If a trader makes few pips per trade, then slippage might be an issue.
Stick to your selections and adjustments. Avoid the temptation of changing or adding traders because they had a few bad trades. Each strategy needs its time. Eventually, there will be periods that you will lose money, it’s inevitable.
When you have accomplished good results in your portfolio, do not get excited! Be patient and remember that slow and steady wins the race.
Always risk a small percentage of your account (less than 10%). Be patient, understand money and risk management. Run with these settings a few months and see how it goes. Remember that all traders will have a losing period. Even the ones with a great historical performance. Before increasing the amount of money for a trader, consider that it’s possible that this trader might not win afterwards. This can cause the loss of some or all the profit gained by the trader or even loss of profit that other traders made. You have two options then: a) stick to your new settings and hopefully the trader can recover the losses soon or b) restore previous settings to minimize risk, though it will take a lot more time to recover the losses.
It’s a fact that only a small number of traders are consistently profitable. It’s up to you to select the appropriate ones.
Before you start investing, you have to be ready to lose! Trading involves substantial risk, and there is always the potential for loss. Past performance is not indicative of future results, and trades or investments can go down as well as up. If you do not have the extra capital that you can afford to risk, you should not trade. No “safe” trading system has ever been devised, and no one can guarantee profits or no loss.