Like the new craze in town, Social trading seems to be the ‘in-thing’ and buzzword among forex traders. Many trainers, ebook authors and seasoned traders swear upon the social trading alter and claim that it is a sure-fire way to make huge sums of money without ever losing a cent. Really? I don’t think so.
What is Social Trading?
Social trading is where a trader is allowed to copy the trades of another forex trader. You log into a website, look at the most successful trader, click ‘Copy’ and every time the trader places a bid, your account automatically places a similar bid.
Logically, if this guy is as good as claimed and making bucket-fulls of money, then you too should make bucket loads of money, right? Wrong!
First and foremost, the fact that the trader is a ‘top trader’ with 95-98% success rate does not mean that he is making money on 95-98% of his trades. Some social traders/signal providers just leave multiple positions open for an infinite amount of time only closing the ‘winning trades’. If you copy such a trader, YOU TOO will have multiple losing positions open and when the signal provider closes them (automatically making you close them as well) you will be wiped out of the market.
Secondly, despite the fact that every blog or article calls Social trading ‘the auto pilot of making money’ or ‘you do not need forex knowledge to trade, just copy the pros’ Don’t be fooled by these catchy words. TO SOCIAL TRADE YOU MUST HAVE A BASIC IDEA OF HOW TO TRADE ON YOUR OWN! TRUST ME! You should be able to spot a rogue signal provider from a mile away and you will only know if a trader is doing the wrong thing if you have some basic trading knowledge.
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Do you have any comments on this article or any social trading experience you would like to share? Place a comment below and enlighten the rest of us.
I wish you happy and prosperous trading 🙂