Lately, you may hear Social Trading more often, following in the footsteps of Mirror Trading which is rife first. This platform type for sharing forex trading ideas, indexes, etc.
Understanding Social Trading
Social Trading is a system where financial market investors rely on content collected by Web 2.0 applications as their source of information in making investment decisions. According to Tradingpedia, it enables users to share information with other members of the community in real time Besides, it presents a new way of analyzing financial data by providing a basis for comparing and copying other people’s trading techniques or strategies. It is a type of online social network. Besides, it is like Twitter or Facebook that contains only trading ideas.
Based on this idea, it resembles a large network of successful/professional traders and followers. You can find the form of the platform on which Social Trading on the facility provider. Each serves as a place where traders can share thoughts about trading. Additionally, it follows those recommendations that are reliable.
Initially, it appeared in the form of Copy Trading, as provided by eToro and ZuluTrade. However, in its latest developments, a Social Trading platform is not always connected or provided by forex brokers. An example is TradingView, where traders from all over the world can draw and share their trading ideas. Then, there is also SIRIX whose main function is trading software like MetaTrader4. However, it has integrated Social Trading technology and can be adopted by many forex brokers.
Understanding Social Trading Characteristics
Whether provided by a broker or not, Social Trading has four distinctive characteristics:
- Free flow of information between traders.
- Cooperation between traders, where everyone in the network can simply share information or jointly conduct research.
- You can only do monetization by working with a forex broker or providing information services and premium tools for its members.
- Transparency, in the form of disclosure of information. Thus, each trader can judge for themselves the credibility of the Signal Provider he follows.
These characteristics make it as an important vehicle for today’s forex traders, both experience and beginner traders. For beginners, in particular, listening to signals and analyzing more qualified traders can open their eyes and provide additional knowledge.
However, Social Trading is not without flaws. The main disadvantage is the time gap between the receipt of information by the main trader and his follower trader. This time difference not only makes the execution not always entirely synchronous but also allows for significant changes when the time difference takes place.
Read more: How to Consider the Suitable Time Frames
