Social trading (or “copy trading”) allows you to mirror the trades of more experienced traders without actually copying their trades. Instead, all you do is track what they do and follow them through an investment app. Their actual positions are locked away from your view – which shows you how much money they have made – so that there’s no risk of accidentally following a trader who loses instead of profits. You can choose how many traders you want to copy, depending on your preferences and cash resources, but only one person at a time.
Trading in this way is called social trading because all the “action” takes place on a website. Social networks have a significant role to play here, too: most traders will post the trades they’re going to make and discuss them with other people on sites like Facebook, Reddit, or Twitter, which you follow through your social login from the app.
It allows you to join in with others who share information about what they’ve been doing, for example, by commenting on how much money they have made. Anyone can share their own views and feedback; only after making some successful trades yourself do you get access to the actual portfolio of another trader’s positions without entirely copying them (and paying a fee). A trader is only copied when you explicitly invest in their trading strategy, rather than just using it as a free reference point.
What Do You Need to Know?
If you’ve never heard of social trading, we can certainly appreciate why – it’s a relatively new form of investing, and not many people outside the investment circles know about it. But it would be crazy to ignore such an opportunity. If you’re new to investing and want some help and support along the way, or even if you’re already making money but want to ensure that your profits continue growing, then social trading is where it’s at. Have a look at the Saxo markets to decide if you’d like to trade here.
Here are some things that might help convince you of its benefits:
1. Trading Costs Brought Down
Suppose someone starts with $5k in his account. He wants to make investments that will pay off when he eventually withdraws them but doesn’t have much knowledge or experience in the market. Unfortunately, many people fall into this category – and it doesn’t have to be that way. With social trading, you’re never going to be the person paying for their own mistakes – instead, you’re going to follow those with positive returns and take notes from their strategy as well as profit from it. You don’t need as much money as before because more experienced people than you cover your costs.
2. Insight That’s Far More Accurate Than Your Own
It’s easy to guess that you’ll make a good return on investment if a trade turns out successful, but whether or not that will happen is another issue entirely. The traders who are succeeding in social trading are the ones who have good access to information and know how to use it correctly. Perhaps they make fewer trades overall but do them much more strategically, or maybe they’ve invested in something unique that no one else has thought of before. Either way, you’re following someone who knows their stuff better than you, so your returns are going to be much higher as well.
3. Professional Advice on Demand
You might not realize it now, but experienced traders are often asked for advice by people thinking about investing. Social trading lets you sidestep this situation by gaining access to a pro’s portfolio without having to pay their rates; all you need is an account with the right app and some knowledge acquired by following someone else. It’s up to you whether or not you do this, but there’s no reason to turn down free advice, even if it’s just in the form of an example portfolio that shows what can be done when properly applied.
Social trading is a relatively new way of making money that allows you to follow successful traders rather than having to invest all your own money into trying out another person’s strategy entirely. You get access to their portfolios and pay nothing extra for it; instead, your fees are reduced because the people who are already good at investing help you out along the way.