To receive new articles instantly Subscribe to updates.
Pros and Cons of Forex Social Trading
Written by: PaxForex analytics dept - Wednesday, 08 August 2018 0 comments
Traders can collaborate with peers with the same interests, exchanging mutually beneficial trading related information. In the old days, successful investors sent out investment advice through periodical newsletters to their subscribers. Their subscribers then tried to apply that advice so they can obtain financial gain. The rise of social media spurred demands and offers for such networks specifically aimed at online forex traders, so that "subscribers" can follow and copy those advices more easily.
Social or copy trading is a kind of an automated trading, where transactions are being copied from one account to another. There are special platforms for transactions copying. You get registered in such a platform, choose a provider of signals and subscribe to his trading signals. After this trader’s transactions are automatically replicated in your trading account. You can copy all of the transactions in full, or put certain restrictions, such as the number of transactions per day or fraction of deposit involved.
As a social trader you are just monitoring and following other traders and basing their trades on the professional decisions of more seasoned traders, there is no need for your own technical or fundamental analysis. It is possible to earn some money – if you are willing to take the risk. You can join in with little knowledge of the market. Passive income – other investment venues would require more effort and time. Maybe better than doing transactions on your own, if you are an emotional trader. Risks are managed more effectively
than doing manual trading – there is a range of expert traders to follow. You can copy as many as you want.
Finding someone to copy from the sea of impressive profiles is a form of risk in itself. From the hundreds of profiles, you can be sure to find some reckless, therefore risky, traders in them. Copying even the most knowledgeable traders is still a form of risk. Some traders can have so many copiers and never lose on hundreds of trades, only for them to lose their money on one single trade. A huge percentage of traders are actually not making any money from forex. As in manual trading, it is still almost impossible to predict how it will all turn out. Traders you copy may not care about you, their copiers, when trading – they might only care about their commissions.
These are the pros and cons of forex social trading. However, success depends on capitalizing fully on the pros and reducing exposure to the negative aspects of forex social trading. The conclusion is that social trading as a whole or copy trading by itself, they might not suitable for some traders, but there are also traders who will benefit from it. Think carefully before you decide on a course of action. Be aware that although you don't personally make the trade in copy trading, it does not mean the element of risk in online forex trading disappear. Just because you follow advices from successful traders, it does not necessarily mean that this advices are perfect.