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April 10 2016


Social Trading - Fad or Phenomenon?

Copy trading
Social Trading has been in existence for several years now, with well known platform ZuluTrade being build back in 2006. However it is only more recently that is certainly has begun to take off in a major way. For example ZuluTrade now supports as many as 65 different brokerages and has grown into a huge company.

was ist copy trading
Social trading allows traders to see what positions other traders are opening in real time and either manually follow these positions or follow all the trades of this particular trader. The key idea behind social trading is simple, it allows individuals to piggyback on the results of successful traders allowing them to make considerable amounts of profit. Subsequently the followed traders themselves make significant commissions for everybody who decides to adhere to their trades. Giving successful traders reasons to share their successful techniques and methods with the wider Forex community.

This kind of trading takes a large amount of the difficult decisions out from the trading process and this is partly why it has been pushed so heavily by brokerages. Since it attracts a whole new breed of traders who don't have an in-depth idea of the financial markets but are evident that there is much money to make from day trading etc. But social trading isn't without its very own risks. A number of traders take part in high risk trading strategies hoping of making significant commissions from followers, often scalping systems blow up leaving a great deal of their followers with huge losses. These trading sites have countered this challenge with a number of different methods, eToro by way of example allows some to assign at the most 20% of their total capital to following one person trader. Even these kind of measures still leave traders facing significant risks.

This particular industry has flourished and will continue to flourish mainly because many people will be attracted to the possibility of making significant returns on their capital from simply following a trading actions of others. Nevertheless the significant risks associated with such trading in many cases are vastly understated. Engaging in social trading can be carried out for very little with many social trading brokerages requiring deposits of a maximum of $50. While I'm sure there have been a number of major success stories when it comes to social trading, I am willing to be there have already been a similar number of substantial losses. Prior to involved individuals should take a long hard think about whether this activity is suitable for them.

Don't be the product, buy the product!