Investing money in the stock market requires a number of key skills. Indeed, becoming a successful trader, whether you’re dealing with stocks, bonds, ETFs, cryptocurrencies or forex, requires a great deal of knowledge, combining an understanding of financial trends and current affairs with an ability to study and analyse economic forecasts and business reports.
For those that lack these skills, social trading comes into play. It’s a way for investors to follow a successful trader and mimic their investment strategy. It means people with little knowledge of the markets can copy those who share publicly their approach and trading ideas. From stock trading to online investing and crypto trading, the investor can utilize the historical performance of a trader to make an informed decision on potential future success.
Social trading – the beginning
Its origins can be attributed to automated trading which came to prominence in 2005. This method of trading, also known as algorithmic trading, saw the sharing of data showing historical strategy. Tradency is widely considered one of the first to use the system which they referred to as mirror trading where a trader would make available their strategy for others to follow. Those viewing the data could make a decision whether or not to copy the transactions within that strategy.
This is where social trading’s beginnings originate. By 2010, this form of trading was becoming more popular because the ability to share information was becoming easier across the internet. This could be done in emails, newsletters, chat rooms, and forums. Tradency’s automated system was the first to realize the “mirror” format. Others picked up on the idea of publicizing strategy and offered the ability for traders to connect their account to a trading platform which users could choose to follow.
Social trading was the next step, allowing open discussion of strategies. Its popularity was helped by the growth of social media. Whereas Facebook and Twitter were making a big mainstream splash, platforms designed to allow users to share ideas and discuss copy trading strategies prompted social trading to grow.
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A revolutionary way to trading
Instead of popular social networks where the sharing of selfies is the norm, social trading sees the sharing of investment strategy, trends and forecasts in an open, collaborative environment. Part of the benefit is that newcomers or less experienced traders can make informed decisions based on the actions of professional traders. Combining a number of reliable sources helps in the social trader’s decision making. This is backed by publicly accessible historical data.
For many social traders, whether they are buying and selling stocks or cryptocurrencies, once a suitable trader is identified, one who meets your needs, their activity can be replicated. It’s a way for new investors to begin trading. And while it’s an approach which can be used indefinitely, it’s also beneficial to build a knowledge of trading markets. That experience is valuable for a trader’s future working the markets.
Earning as you learn
A popular social trading platform such as eToro, which specializes in copy trading as a stockbroker, is the place to start for newcomers who want to invest and like the idea of having various markets to work from. This enables investors to connect with a community of like-minded traders, sharing strategies and insights in order to copy elements such as order types, allocations and assets.
Such platforms also offer the other advantages of being a social trader such as rapid access to relevant and reliable trading information, the ability to earn as you learn, and the opportunity to build a relationship with others. Such communities or groups also allows traders to view fluctuations in the market from an unbiased perspective (and there’s a high level of transparency which reaffirms trader confidence). This approach can also help manage risk more effectively by, for example, watching strategies to see how they play out.
For the new trader looking to earn as they learn, the advantages are significant. It means the ability to make workable market plays that payoff from the get-go. Those with less experience can utilize the knowledge of their peers as a way to better understand the factors that go into a successful strategy. It also means the new trader doesn’t have to spend days and even weeks conducting technical analysis.
It’s also less time consuming. Social trading requires less effort. You can get started straight away. And you can do the work when it suits you which means it’s a “free time” activity where a lot of forethought has been done for you. If you enjoy it and get good at it, the experience built will enable you to devote more time to it in the future.
Social trading has emerged as a vital asset to investors. Regardless of experience, traders can get together online to learn and share ideas. This innovative, straightforward and effective way to earn additional income has revolutionized the finance world.