Social Trading – Fad or Phenomenon?

Copy trading
Social Trading ‘s been around for several years now, with well known platform ZuluTrade being build back in 2006. Yet it’s only more recently that’s has begun to take off hugely. For example ZuluTrade now supports when using 65 different brokerages and possesses grown into a huge company.

social trading
Social trading allows traders to determine what positions other traders are opening immediately and either manually follow these positions or follow each of the trades of this particular trader. The key idea behind social trading is very easy, it allows individuals to piggyback around the results of successful traders permitting them to make considerable amounts of profit. Subsequently the followed traders themselves make significant commissions for each person who decides to follow along with their trades. Giving successful traders grounds to share their successful techniques and methods with the wider Forex community.

This type of trading takes a lots of the difficult decisions out of the trading process and this is partly why many experts have pushed so heavily by brokerages. Mainly because it attracts a whole new variety of traders who don’t have an in-depth knowledge of the financial markets but are evident that there is much money to be made from day trading etc. But social trading isn’t without its very own risks. A number of traders embark on high risk trading strategies in the hopes of making significant commissions from followers, often scalping strategies blow up leaving a great deal of their followers with huge losses. These trading sites have countered this issue with a number of different methods, eToro as an example allows some to assign no more than 20% of their total capital to following one person trader. Even this kind of measures still leave traders facing significant risks.

This kind of industry has flourished and may continue to flourish because of the fact many people will be attracted to the possibility of making significant returns on his or her capital from simply pursuing the trading actions of others. Even so the significant risks associated with such trading in many cases are vastly understated. Stepping into social trading is possible for very little with many social trading brokerages requiring deposits of no more than $50. While I’m sure there are a number of major accounts of success when it comes to social trading, I am willing to be there are already a similar number of substantial losses. Prior to involved individuals should take a long hard take into consideration whether this activity is suitable for them.

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