Social forex trading has been a trend nowadays. Social trading became popular because it is a combination of traditional trading and online communities. It is also known as copy trading or mirror trading. Social trading is very simple to do. It is called mirror trading or copy trading because novices copy or mirror the trade of veteran traders.
Why Social Forex Trading?
1. It’s a time saver – eToro social trading has invented copy trading which allows new traders to check the profile of other traders and review their actions. If they like what that particular trader is doing, they can copy or mimic the action of the trader. Unlike the traditional forex trading, Social forex trading can be done almost immediately by the newbie because all the information and resources that they need to start trading is within their reach. Just like what we see in the advertisement of eToro, people can spend less time trading using this platform because they can just copy what the experienced trader is doing and earn when the experienced trader earns.
2. You know where your money is going – Every trader has their profile open to the public so that people can see what they are doing. Newbie traders can check their profile and the history of how they trade. eToro social trading has a risk score for each trader based on their strategies and their trading habits. Newbie traders can choose the risk score that they are willing to take and copy their strategies.
3. It helps you gain knowledge – No one is a master of everything and that also applies to social forex trading. There are a lot of markets available globally. Social trading will actually allow you to check the other stock markets that you might be interested in like crypto trading.
4. It allows you to analyze – Social trading is not always about experience or having the time to waste to do trading. Experienced traders also use the copy trading method to take a break from the fast-paced trading life and managing their portfolios so other traders can copy them.
eToro has been a leading platform to trade over the past years. Without it, copy trading would need a power of attorney to manage the account or you would need to manually copy a trader often. eToro will let you copy a trader and the platform will mimic the actions of the experienced trader automatically. Not all social trading platforms would allow you to do this.
eToro actually lets you trade in any niche be it commodities, currencies, stocks, or cryptocurrencies. Let me give you a walk through on how to join the platform.
1. Sign up for eToro. It’s free and all you need to do is sign up with your name and create a user name. After that, you will need a phone number to verify the account.
2. Complete your profile to start trading. Some questions will pop-up regarding your trading experience and you need to answer them honestly. Then, verify your account.
3. Make a deposit. Although the deposit amount has changed over the years, this year eToro social forex has decided to raise it’s minimum deposit to $200. The reason behind the higher deposit for joining eToro is to create awareness to the traders. Of course, higher deposit means people will be careful of how they make a trade, thus lowering the chance of failure.
4. Familiarize yourself with the platform. You can check the watchlist, portfolio, news feeds, trade markets, and copy people.
What to Avoid in Trading with eToro
1. Don’t just choose the trader with the most copiers. Blindly copying someone can be a danger to your money. Remember that most people on eToro are beginners like you and they might have copied that person for the wrong reason. Analyze the trader first, check his history, success rate and the techniques he is using before copying them.
2. Do not over trade. When you are a beginner it’s tempting to check your investment regularly and expect a result in just a short period of time. Bear in mind that there are no traders that get an income every week. Be patient because over-thinking may cloud your judgment. Think of a long-term approach and monitor your investment regularly to see where your money is going and when to pull-out your stocks.
3. Do not copy a trader that is a newbie as well. Choose a trader that has a good history and have been using eToro for more than 6 months. Their techniques should show that they are experienced traders and they were not just lucky with their respective investments. Check their weekly and daily drawdowns. If it’s more than 10%, then do not copy them/ Also be on a lookout for returns that are unreal.
4. Traders that are uncommunicative are not good traders to copy. Choose someone that will help you learn and can guide you to your success. Traders who do not reply to your messages are more likely not knowledgeable enough or they are careless traders.
Copying is easy in eToro. Just open the profile of that person and click on the blue copy button. A prompt will pop-up on how much you will invest in. There is also a stop loss feature in eToro. If you are losing 40% of your investment, your account will automatically stop copying the trader so that the remaining amount of your money will be safe. 40% is the default losing stop loss rate, but you can always lower your losing rate to save your investment.
You can monitor your investment by clicking on the portfolio section. Here, you can see your current position and check your trading history. The traders you copied will also appear on this page.
Social Trading vs Social Networks
Social trading is based on social networking. You collaborate with other traders and use the data provided for trading. It’s basically how social media works. You get to connect with other traders all the time and you get to see what they are doing. You basically exchange ideas and strategies about trading with them.
The only difference between social trading and social network is that social trading focuses on trading instead of the personal or social aspect of a person. The information on your profile is all about the trader. It contains their past activities, their niche, and their success rate. Just like social media networks, social trading gives you regular information about veteran traders. Veteran traders give out advice on their trade. Just like social media, not all the information that traders share is true. You need to use your own judgment on whether or not the information that was provided by a veteran trader is legit or not. Do a social trading review of the profiles of the traders before you start copying their trade.
If you are new in social trading you can check out a lot of trader profiles and follow them. This is a very popular feature of eToro social trading. Check out the tips that the trader is posting and weigh it if what he is saying is true. Follow them so that you can see what they are doing and the comments of the other traders on the post. Of course, just like social media, you can always ask questions so that other traders can comment and give you advice. Always choose a trader that interacts with other traders on the information that they share on their profile. These are traders who are very helpful and are often than not, the ones who give accurate advice to new traders.
eToro social trading also has a private messaging feature. Just like social media, you can send a private message to anyone you are connected with. If a trader you are copying or following makes a move that you do not understand, you can send them a private message their move. Just like social media, you can ask them anything.
Social forex trading is actually a good platform for newbie traders. The data that you can acquire from it will allow you to trade and make financial decisions without the needed knowledge and training that traders enroll in before starting to trade. You can also help fellow aspiring traders when you have gained enough knowledge in trading. Giving advice and sharing trade secrets with others is one way of giving back to the community that helped you with trading.
Social forex trading is for everyone. It doesn’t matter if you are an experienced trader or an expert trader. It gives everyone an opportunity to collaborate with other people and get a higher chance of success in trading. It is based on your instincts on who and what to follow. At the end of the day, the opportunity to earn is waiting for you. Do not be afraid to fail because you will learn from it and be an experienced trader in the long run.