Globally, technology is changing how people operate. Companies such as Amazon have changed the way people buy while companies such as Uber have changed the way people commute. Social media has changed the way people communicate and connect with one another. In the financial market, the development of trading systems such as MT4 has liberalized the way people participate in the financial market. As a result of these technological advancements, a lot can now be done within a fraction of a second. Social trading is one of the most important aspects in the market today. Social trading allows traders to trade amongst themselves globally and share trading ideas. Using the numerous social trading platforms in the market, a novice trader can copy strategies of a rockstar trader and make sweet returns. In the internet, there are many applications and platforms that promote crowd sharing of financial matters. For instance, there are platforms which allow anyone to predict the next market moves. Traditionally, analysts forecasts only focused on top analysts in leading financial institutions such as JP Morgan, Morgan Stanley and Citi among others. Today, anyone can easily make their own predictions and take part in changing the way the market operate. A tool such as Yoddle claims to have more accurate market data than the one from the leading analysts. In addition, it is possible for any novice trader to copy trades from other experienced traders using tools such as eToro. Many people have made good money by copying these trades while others have lost significantly. The first thing to understand in social trading is that it does not always work out for you as a trader. A common disclosure in all the social platforms is that the past performance will not determine the future performance. For this reason, it is possible to follow and copy excellent traders but still lose all your investment.
In the financial market, before you decide to do anything, it is important for you to conduct personal research and come up with a solid conclusion. This research should be both on a fundamental and technical level. In fundamental analysis, you simply conduct research on the instrument you want to go long or short and make your financial decision. In technical analysis, you simply look at the charts, conduct an analysis, and then make a decision on how the market will move. The purpose of doing this research is to make your own decision before following another trader.
Another key important issue on social trading is on time. There are traders who open trades with a purpose of going long or short for a considerable amount of time such as weeks or days. To achieve this, they have huge sums in their accounts. Also, they use very small volumes. When copying these trades, it is important to assess if your account has sufficient funds to withstand a long dive or a long hike.
When copying trades, it is important to have your own strategy which will help you mitigate risks. As I have explained in my previous articles, having a solid trading strategy will help you minimize risks. Some of the main strategies in trading include: scalping, hedging, using the Fibonacci indicator, and trading the news. You should have a lot of information on the strategy you use. Additionally, the trader you copy from should use the strategy which you have knowledge on. It is wrong to copy trades blindly because your goal is to be a leading trader where people will copy from you.
Many social trading platforms have regular competitions where traders compete to win a certain amount of money. As a day trader, you should participate in these competitions because it will challenge you make better financial decisions. It will also help you assess your strengths and weaknesses and then come up with strategies to improve. In a recent interview with CNBC, top investor, Mario Gabelli noted that social trading will disrupt the entire financial market where individuals and high net worth individuals will copy trades at no fee rather than use expensive hedge funds. Since this industry is in its infancy years, as a day trader, you need to take action to be the best in it. Doing this will help you become successful.