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Is Social Trading Improving Your Trading Performance?

17 April, 2019

With most of the retail traders realizing how difficult it is to trade the markets, social trading had been gaining traction over the past few years.

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With the latest technology developments, you are able to copy trades of other more experienced traders, but is it the best you could do in order to be successful in trading?

Let’s dig into this subject, see why people use social trading as an easy way out, and how you could use it in order to come out with some original trading ideas.

Taking the easy way out

Although social trading might be a good opportunity to find other people’s ideas, most of the traders who jump into such programs think they will be able to make money by simply making a deposit and starting to copy what other people do.

Letting your money in the hands on a trader who had a winning streak that lasted a few months isn’t exactly the best way to approach trading. You must become comfortable with the idea that losses are part of the game and you won’t manage to avoid that even if you will work with the best traders on the planet.

 

Alt text: benefits of social trading

Commitment to learn

Social trading can be a good opportunity to combine your ideas with the ones of others, but you must also understand how the markets works, monetary policy measures and their influence on asset classes, different particularities of trading instruments that might influence its price in the future and many other similar subjects.

Simply relying on anyone’s ideas is like walking with closed eyes and hoping that someone will lead you to your destination. Your goal when using social trading is to not fall into the trap of avoiding to take responsibility for the results you could get.

Positive aspects of social trading

There are many ways you could benefit from social trading and not only copying trades. You could join a program like the finq.com refer a friend program, which will allow you to access a bonus for each deposit any of your friends will make.

Involving the friends in the process in another positive social side of trading, as you could learn together and from each other while you progress. Your learning curve could accelerate even faster as you’ll be able to go through a larger volume of information in the same amount of time.

Diversification

The worst decision you could ever make is putting your entire capital at risk by taking just the decision of one trader. Instead, if you think that you are not able to generate trading ideas yourself and do not feel comfortable working under pressure, you could design a more complex allocation methodology.

You could invest 10-20% of your capital in high-risk profile traders, 50% in medium-risk profile, and the rest with traders that take limited risks. Try to diversify so you won’t be exposed to a single type of traders, in order to avoid sudden losses that can wipe out a big portion of longer-term profits.

Summary

The bottom line is that social trading could have some positive influences on your trading performance. Especially if you are in your early phases, watching how other experienced traders make decisions could accelerate your learning curve. The downside of taking the path of social trading appears when you start thinking that you can lay on your back because money will pour into your account by simply copying other trading ideas. Sooner or later you’ll get stuck into some nasty trades and your lack of education won’t help you manage them correctly.


 
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