Social trading is a new phenomenon that has recently emerged in finance.
For those who don’t know, it’s online trading where you get to follow (and copy) other traders’ trades and investments.
Instead of going through all the motions yourself, you can watch and learn from an experienced trader and mirror their every move for a pre-set fee or commission. The idea caught on quickly, and today, several companies worldwide offer such services.
The UK market leader makes over £200m per year and has over 21000 customers united under its banner. Copying their trades can only bring success.
There’s the bonus of being able to chat with your chosen trader whenever you feel like it – just for an additional fee, of course.
However, most people tend to think social trading is somewhat controversial. Many believe it goes against the very idea of what investing is about. Trading isn’t something you can copy blindly, after all. It requires brains, proper analysis and common sense.
So, if everyone would copy someone else’s trades without thinking for themselves, where would that leave us? Who will be the traders of tomorrow? Nobody knows, but it seems like a dangerous path to go down.
However, even though the concept is unproven and unwise in some people’s eyes, there are still plenty of supporters out there who aren’t afraid to speak their mind and sing its praises instead.
After all, why not take advantage of what everyone else is already doing? You can constantly adjust your strategy if you think it’s not working out for you.
Plus, when everybody copies one person, only the best traders will remain standing (or copying), which would make it highly likely that they’ll turn out to be good at their job. Not convinced yet? Well then, let us tell you more about it.
Are you new to the world of trading and finance? If that’s the case, then welcome on board.
Social trading is something you should consider, especially if you’re new to trading.
There are plenty of reasons for this:
- Firstly, beginners tend to learn more when following someone else than they would by themselves.
- Secondly, they lack the skills to make informed decisions on what to buy and sell, but we’ll get to that later.
What’s more, there’s no reason whatsoever not to give it a go. You simply need to start using a company’s social trading services to register an account in most cases. That’s free of charge almost all the time, so why not? Who knows, maybe you’ll find it helpful after all.
Well, as mentioned before, many people see social trading as a potentially dangerous avenue because everyone following another person without thinking for themselves means that whenever they make a mistake (and they will), that mistake is immediately amplified through hundreds or even thousands of other traders at once.
Therefore, one wrong decision could spell disaster for you and your portfolio.
Apart from extending beyond individuals’ capabilities (which may be met with disastrous consequences), there are other inherent problems associated with copying other people blindly, which you should know about.
Social trading platforms have been accused in the past of being “liars’ playgrounds” because their traders’ performance stats are no longer fictive at best.
Nowadays, social trading platforms allow anyone to join for free, so why would anyone pay if they can get all the same features for nothing? Well, there’s only one answer to this: they wouldn’t.
As a result, many of these companies fabricate results and statistics to entice more members into signing up for their services.
It may mislead novice investors who don’t know any better into believing that these people must be successful traders if all those numbers are correct after all.