Social Trading has been around for several years now, with well known platform ZuluTrade being create back in 2006. But it's only more recently that's has begun to take off hugely. For example ZuluTrade now supports a total of 65 different brokerages and it has grown into a huge company.
Social trading allows traders to find out what positions other traders are opening instantly and either manually follow these positions or follow all the trades of this particular trader. The principal idea behind social trading really is easy, it allows individuals to piggyback for the results of successful traders letting them make considerable amounts of profit. Therefore the followed traders themselves make significant commissions for everybody who decides to follow along with their trades. Giving successful traders a reason to share their successful techniques and methods with the wider Forex community.
Such a trading takes a lot of the difficult decisions out of the trading process which is partly why many experts have pushed so heavily by brokerages. Since it attracts a whole new breed of traders who don't have an in-depth comprehension of the financial markets but do understand that there is much money to make from day trading etc. But social trading isn't without its own risks. A number of traders embark on high risk trading strategies in the hopes of making significant commissions from followers, often these systems blow up leaving a lot of their followers with huge losses. These trading sites have countered this concern with a number of different methods, eToro for example allows some to assign no more than 20% of their total capital to following anyone trader. Even this kind of measures still leave traders facing significant risks.
This kind of industry has flourished and will continue to flourish mainly because many people will be interested in the possibility of making significant returns on their own capital from simply following trading actions of others. However the significant risks involved with such trading are often vastly understated. Getting into social trading can be carried out for very little with many social trading brokerages requiring deposits of at most $50. While I'm sure there have been a number of major success stories when it comes to social trading, We are willing to be there have been a similar number of substantial losses. Before getting involved individuals should take a long hard take into consideration whether this activity would work for them.
Last updated 352 days ago by copytrading6