Entering a new trading market may feel like navigating a maze of acronyms and new terminology. Each financial asset has its market name (“Ticker“), and there are nicknames and shortcut abbreviations for a whole slew of financial markets, strategies, and trader types. Enter social trading.
Social trading is like a stepping stone into the world of trading. Thanks to the advance of mobile trading and internet-based social trading platforms, it is easy to connect with fellow investors. You can swap tips, share analysis, and mirror strategies through social trading. Learn all about social trading and how our platform can help launch your trading career.
What is Social Trading?
If you have ever found a job through a connection, gleaned helpful advice from an online forum, or used a tip on the internet, then you will understand social trading. The internet is a Leatherman of resources for all aspects of life, and the world of trading and investment is no exception. Social trading refers to the networking of traders online. Through forums, social trading apps, and social media, traders can come together to collate financial information and strategies. Technical analysis tools such as TradingView boast of being more than just charting software but the “Facebook of traders.”
Finding a social network of like-minded peers is a helpful resource for beginner and expert traders alike. If you are unsure of a new trading strategy, entering a market for the first time, or trying out a platform for the first time, a little advice can go a long way. Many traders also swear by a “rob and duplicate” (R&D) strategy, which assesses what technical indicators and trading strategies have worked for others before tweaking it to their advantage.
Social trading is essentially a form of borrowing and learning from like-minded peers. Social trading is a broad term that encompasses various degrees of trading styles. To what extent your trades are influenced by social trading is up to you – some are inspired, others copied altogether.
Social Trading Versus Mirror Trading
There is occasional confusion between often interspersed terms: mirror trading, copy trading and social trading. Essentially, mirror and social trading are a form of copy trading. All three industry definitions describe an investing approach whereby you choose an expert trader and then copy their trades. Mirror trading is where your account is physically linked to another. Ideally, you want to connect your trading account with someone you believe will make astute investment decisions. Every time said investor makes a trade it is replicated in your account – just like you were holding a mirror up to them!
Mirror trading is sometimes called “copycat investing.” Both are subtly different to social trading – although the latter term is probably closer in meaning. Copycat investing does not have the physical connection to an expert account – trades are not duplicated automatically, but you can choose to copy another’s movements should you wish.
Social trading has a looser interpretation. The array of networks and forums that bring together day traders, long-term investors, analysts and brokers all make up the resource at hand when you are social trading.
Social Trading Versus Social Networks
You may assume that social trading is a kind of Facebook, and here is where you are right: social trading is just like a social network where you meet other users, exchange opinions, make comments, and share views. The distinction with social trading is that the conversation revolves around one thing: trading. The information in your profile will be related to you as a trader – and not your movie or food preferences!
Using various platforms, including our own, you can connect with expert traders and find out the secrets to their success. You can collaborate and join forces with other traders. Many people use social trading simply to emulate portfolios they admire. You can simply copy strategies you have seen work for others and that you believe will work for you.
There are many ways to leverage social trading to your advantage:
- Follow other traders: Certain social trading platforms will let you “follow” other users. This way, you can carve away at your network until you find the traders you believe could really make a difference to your portfolio. Retail traders may wish to connect with retail investors for example. You can observe the other users’ history, movements, comments, and more through the follow function. For this reason and from a social trading perspective, the more active a user is, the more of the community they will open up.
- Private messages: The messaging options will depend on your platform for social trading, but many sites offer a private messaging function. By initiating a conversation with another trader, you can probe them about their methodology and more.
- Data access: One of the best ways to profit from social trading is by utilizing the vast wealth of data it provides. The platforms that offer social trading will display a stream of up-to-date financial information alongside the users’ trades themselves. Staying abreast of market news is key to many traders’ success.
Pros and Cons of Social Trading
As we have seen above, social trading can be an excellent approach. Many traders swear by the financial inclusion, beneficial networks and supportive communities that social trading entails. Some of the advantages include:
- Learning from the best: holding onto an expert trader’s tailcoat can let you know from more experienced traders or those employing more complicated strategies.
- Consult with peers: You can educate yourself through private messages and public conversations and share your trading strategies and tips with the community.
- Results-based decisions: another recognized benefit of social trading is that you can assess how strategies have worked for fellow users. Once you see how a specific play has worked out, you can decide whether it would work for your portfolio. Essentially, you can see the fruits of others’ labor and pick it for your own!
Social trading works for many traders but not everyone. A common mistake is to assume that copying carries no risk. Even experts make mistakes!
Here are some of the potential drawbacks to bear in mind when considering this approach:
- Nothing is certain: Remember that short-term successes don’t necessarily translate to long-term success. Choose your trades prudently and make informed market decisions.
- Expertise does not always pay off: even the most seasoned and high-hitting traders misread the markets sometimes. Beware of assuming anyone turns all they touch to gold – there is no “Midas Touch” in trading! A far better avenue is to use the community to exchange trading tips, investment strategies and share ideas for software to use.
- Look out for loaded information: remember that each trader will be looking out for themselves as number one. Zealous advice to invest in a particular asset should be taken with caution, don’t be dragged down by another’s poor decision.
Find The Right Social Trading Platform
Before you can begin exploring the benefits of social trading and accessing community data to make informed decisions, you will need the right platform. Ideally, you want a broker with integrated social tools. Take our platform TradeOr. We recognize that a free flow of ideas alongside technical analysis tools is integral to success in the markets. Therefore, we ensure all our clients gain premium access to TradingView, a charting software program second to none.
Through TradeOr’s portal to TradingView, you connect with 30 million investors and traders around the world. Alongside powerful charting tools, the program allows you to join a global forum of peers and expert traders exchanging trading ideas and results from technical indicators.
The world’s largest social network for traders, TradingView lets you live-stream your trading activity or chat live with other users. Alongside access to this social trading giant, TradeOr also offers an affiliate program whereby you gain 15% on every trade your referral makes. It pays to bring other traders into the warmth!
- What is a social trading platform?
A social trading platform is a financial network whereby you can swap investment tips, strategies and trade online with the advice of others.
- How to get started with social trading?
As with any trading approach, the most important steps are to prepare a plan, assess your financial goals and have a risk mitigation strategy in place. Once you have found a social trading platform, you can begin following traders you believe have astute methods. Chat, learn and trade through an integrated platform like TradeOr.
- What is social trading?
Social trading is simply an approach whereby you observe other traders' strategies, methods, and investment choices and act accordingly. Certain brokers and trading platforms will have integrated features to allow clients to interact with peers and exchange tips and data.