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Forex Social Trading – How It Works?

Social trading is a type of investment that gained prominence around a decade ago with the emergence of trading platforms like multibank. Platforms, which deal in social trading, follow certain principles that are directly linked to social media like a partnership, communication, mutual help and exchange of knowledge. Know more mex

For social trading platforms, copy trading systems function as add-on services. They make it easier for members of a particular community to earn a good amount of money jointly. Forex social trading works very well for new traders as it gives them the scope to learn a lot of things and grow step-by-step.

You could think of social trading as a form of social network as it offers traders a platform to engage or interact with one another, observe how the market is functioning and learn from the tricks and techniques used by different traders. Social trading, in particular, is known for helping traders sharpen their minds and improve their decision-makingabilities.

Social trading, simply put, makes it possible for investors and traders to replicate and then, execute the strategies of experienced traders. While there are many traders out there who perform technical and fundamental analysis on their own, there are some who like to observe other traders and replicate their processes or methods.

How Does It Work?

Social trading offers traders strong access to financial markets. It creates equal opportunities for new and experienced traders to share different strategies and replicate each other’s trades. Along with advanced platforms, new-age technology has made it possible for almost anybody to try their hand at social trading.

When you opt for social trading, you get a bunch of options at your disposal. You can either operate via a social trading platform or handpick a few elements from it and use them in a way that suits you. You have to use your sensibilities and knowledge as a trader while adhering to the principles of social trading.

If you choose to use a fully integrated trading platform, you can use mirror trading or copy trading to share trading strategies. While using a social trading platform, you will realize how similar it is to a social networking website. You can subscribe to a channel run by a trader whose practices you want to follow.

The positions chosen by a trader can be seen on a live feed. Here, you will get the option to replicate their deals. The system has been designed to ensure that a trader doesn’t face any inconvenience while copying the deal carried out by another trader.

You might wonder what leads experienced traders towards sharing their successful strategies. Apart from getting their status elevated, a trader also receives monetary rewards for doing this. Social trading networks feature a leaderboardthat offers one a glimpse into the success rate and popularity of a trader.

There is another alternative for traders. They could use social trading principles but regulate their trades with the help of a mix of signals and indicators. Social trading helps you get an idea about the market sentiments and processes carried out by other traders.

Scope of Social Trading

Social trading started getting popular around 2010-11. One of the most important factors behind its acceptance was the fact that it gave traders the opportunity to copy or replicate forex trading strategies that had already been successful.

In the last couple of years, retail traders have been utilizing social trading to carry out a variety of trades across multiple asset classes. This is one type of trading that works very well even for those who have minimal or no experience intrading.

Parties Involved in Social Trading

Apart from imagining social trading as a social networking platform, you can also look at it as well-oiled machinerythat, if used correctly, yields the kind of results that you expect out of it. Another important thing you need to remember is that different entities come together to make social trading work.

  • Professional Traders

In social trading, professional traders operate as signal suppliers. Since they have a lot of experience behind them, they carry out trading activities with effortless ease. They allow new traders to replicate their trades. Many professional traders run their own blogs so that novice traders could gain more knowledge about this particular space.

  • Novice Traders

The presence of novice or new traders in a social trading platform is as important as professional traders. Social trading, in fact, has been designed to help novice traders. By engaging in social trading, they can replicate the trades of professional traders and get better at trading.

  • Social Trading Platform Provider

A social trading platform provideris someone who provides you with social trading software. This software is required to bring together clients of multiple brokers on one platform. Some of the most well-known social trading platform providers are DupliTrade, MQL5 and ZuluTrade.

  • Platform

Without a dedicated platform, you cannot carry out social trading activities. A social trading platform serves as the bridge that connects novice traders with the ones who have gained a certain amount of expertise in this field. It serves as the place where traders communicate with each other and a lot of useful information is exchanged.

  • Broker

A broker is someone who is in charge of order execution. A broker also makes those instruments available to traders that are required for replicating traders. If you want your social trading activities to be successful, you will need to work with a broker. Finding a reliable broker is tough but is something that one needs to do.

Once you have studied a bit about trading and used social networking sites and groups for some time, you should be quite comfortable in the social trading space. It is a great platform for all kinds of traders and offers good scope for growth.

Since many parties are involved here, a lot of people wonder whether social trading is safe or not. If you choose the right broker, things would fall into place seamlessly. While selecting a broker, you must check their credentials and find out how they can help you in your trading activities.

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