Social trading is a form of investing in which traders are able to observe the actions of professional traders and follow or copy their trading strategies. It’s a great option for beginners as it requires very little knowledge of the financial markets and only a basic understanding of current events. That said, there are a number of tips you can follow that will help you take your social trading to a whole new level. We have described them in this article.
1. Start Out with a Demo Account
Before investing any real money, it’s a good idea to start out with a demo account for the social trading broker of your choice. This will enable you to get to grips with the platform and how everything works without risking your money in the process. One way to go about this is to visit the InvestinGoal website. Here, you’ll be provided with a list of best brokers for ZuluTrade, one of the top social investing companies. You can then try ZuluTrade with a demo and determine which broker is the best option for you.
2. Use the Auto Copy Feature
As social trading basically enables you to follow and copy the trades of those with experience, it’s no surprise that lots of platforms have an ‘auto copy’ feature. This enables you to literally copy the trades of those you are following, and requires little time and effort, save for the click of a button. It’s important to note that the ‘auto copy’ feature isn’t a magic solution to making money, as even the most successful traders make mistakes from time to time. However, it’s a useful and handy tool that can save you a lot of time.
3. Diversify the Traders You Follow
While it can be tempting to just follow one trader, this is never usually a good idea. As we mentioned above, traders do make mistakes and placing all of your eggs in one basket doesn’t often turn out well. Instead, choose a few traders to copy and diversify your risk; 5-10 is a good amount to get started. You may also find that, by doing this, you start to see why each trader makes the moves they do. And, you may prefer certain strategies over others once you get more used to trading yourself.
4. Perform Your Own Research
While copying the trades of others is ideal for beginners, as you get more used to trading, it’s a good idea to start performing your own research. Follow financial news accounts on sites like Twitter and LinkedIn and sign up for some RSS feeds of the top forex blogs. The more you know about what is happening with the financial markets, the more you’ll be able to tell whether a trade is risky or worthwhile. Plus, while social trading is a good idea at the start, you may want to branch out on your own after a while.
Have you tried social trading? Let us know how it went in the comments.