Social trading is considered the next step to social media evolution. This is the newest and one of the best ways to allow users to instantly access important information related to the market, through the use of the Internet. Unlike other trading strategies like technical and fundamental analysis, it gathers information from other users and traders, allowing newbies in the field to gain more knowledge and trading without the need to perform the same analysis.
In short, your trading decision will be based on the data and analysis which are performed by other traders. This is where tried and tested strategies come along. You can give information or acquire relevant facts from other people in the same field. It is proven to be beneficial among newbies and experienced traders.
Basics of Social Trading
Through it, you can share information with other members of the community. This is considered as the most obvious benefit of it plus it allows new traders to see the strategies used in trading and check for the results later on. More so, they can replicate this strategy which is proven to work by veterans in the market. This is the perfect place for new traders to see how veteran traders handle their trades, what they need to look out for, and the reason behind their actions.
It gives newcomers a chance to learn faster from the experience of experienced traders. Not only that, this should serve as their ‘safety net’ against huge losses and failures as they trade in the market. Gone were the days when new traders blew their accounts before actually learning how to trade. Through social trading, such incidents can be minimized although it won’t totally eliminate them.
Checking Credibility Before Following a Trader
Just like in your Facebook feed, some of your friends will try to fake their lives. If they are dealing with something and want to encourage others to join their business, they will post all the nice things you can only imagine having together with the promise to obtain it yourself within a short span of time. Because you are only looking at the posts and not the person behind them, you invested in his business only to end up getting disappointed and losing your money.
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This is similar to the traders you follow. You must be meticulous in picking the right trader to follow, their trading moves, and strategy. Remember that your money is at stake. If you fail to pick the right people to follow, you will be the one to suffer the blow. The credibility of the trader is very important.
Determine if they are really telling the truth and you can do so based on their actions. For instance, they are telling you that the stocks of a certain company will skyrocket and therefore, you must buy. But then, you found out that they haven’t bought any for themselves. This should raise your suspicion and goes to show that the trader is actually lying.