Investing in the stock market and engaging in other forms of trading on the financial markets can be done through the practice known as social trading.
Traders and investors are able to mimic the moves of other successful or more experienced traders without the necessity of conducting lengthy research and analysis on their own.
How social trading works
The way that social trading functions is by making it possible for anyone, whether they are inexperienced traders or seasoned investors, to access the financial markets by replicating the trades and share trading strategies of other people.
For instance, if an experienced trader is using social trading platforms and has a profitable trading strategy, a newcomer to the markets can then copy the trades made by the experienced trader, thereby employing the same strategy without having to do the in-depth analysis and research.
This allows the new trader to get a head start in the markets. You might be able to modify the aspects of social trading that you make use of on your account, but this will depend on the social trading platforms that you use.
Pros of social trading
Users of social trading platforms will come from a variety of backgrounds and levels of trading experience. Therefore, it affords novice traders the opportunity to gain knowledge from more seasoned traders.
Beginner traders are able to crowdsource the knowledge, strategy, and experience necessary to make successful trades through the use of social trading platforms.
It is not a replacement for learning how to trade on your own, but it is another tool that can assist you with overcoming the learning curve.
In a manner that is analogous to the two benefits that have already been discussed, social trading platforms give traders the opportunity to acquire easy access to various forms of trading information.
This access may come from more seasoned traders or from the collective knowledge of a social trading community.
Cons of social trading
It is natural for social trading platforms to emphasize the potential profits that can be made by traders who utilize copy trading.
They emphasize the fact that you will be making the same trades as the traders in their network who have had the most success, and the fact that you will make money is the primary selling point that they use.
Copy trading can give investors a false sense of security, which can lead to overconfidence, which can result in investors losing track of the markets in a way that they never would have done if they had not been copy trading.
Read more: Best Forex Trading Platforms in Nigeria
How to start social trading
If you want to replicate trading ideas, there are only three primary processes that you need to follow:
- Join a social trading platform by creating an account.
- Discover the identities of other traders on the platform and view their profiles.
- You can identify expert traders who represent your desired trading style, risk appetite, and profit objectives by using the search filter. You can imitate their trades by clicking on their trading activity and doing the same.
To get started, all you have to do is create a profile on one of the leading social trading platforms, enable newcomers to duplicate your trades, and then do all in your power to maximize the performance of your own trades.