In today’s technology-driven world, a growing number of forex traders are using the power of social networks to make more shrewd trading decisions. Through social trading, traders can follow the trading behavior of seasoned, successful traders and copy their actions. This empowers individuals with little or no trading expertise to navigate the often tricky waters of the forex market and make a profit. As brokers look for clever ways to recruit or retain clients, social trading gives them another way to boost trading volumes and brand loyalty.
Social trading is the process through which online financial investors rely on user generated financial content gathered from various applications as the major information source for making financial decisions. Social trading introduces a new way of analyzing financial data by providing a ground to compare and copy trades, techniques and strategies. Using social trading investors and traders could integrate into their investment decision-process social indicators from trading data-feeds of other traders.
Social trading allows traders to trade online with the help of others and some have claimed shortens the learning curve from novice to experienced forex trader. Traders can interact with others, watch others take trades, then duplicate their trades and learn what prompted the top performer to take a trade in the first place. By copying trades, traders can learn which strategies work and which do not work. Despite the influx of new social trading platforms in the early 2010s, numbers still continued to increase as brokers see them as new growth engines for converting new and retaining old clients.
We know that social trading offers traders low barriers of entry. People don’t have to spend a great deal of time or brainpower becoming forex experts. And once they copy other traders’ behavior and see their trading decisions pay off, they feel part of a larger community. This increases the likelihood that they will stay with a broker for a longer period of time or spread the word that your brokerage is a good place to start trading forex with others.
One of the major disadvantages of social forex trading is that it remains relatively challenging for a trader to select the right social platform. There is no shortage of networking platforms and this makes it difficult for a trader to make a choice. And although social forex trading is not a scam, there are some social trading scammers that don’t play by the rules and an unsuspecting trader can be easily swindled. Choosing the right trading platform is the key to social trading but it is tricky and traders are not always savvy enough to decipher the good from the bad.