Thanks to the rise of
online brokers, it’s never been so easy to open a trading account. Anyone can
trade in foreign currency these days, and you don’t need any special skills to
make money from your trading activities.
Trillions of dollars
are traded on the forex markets each day, which makes it an attractive
investment opportunity for would-be traders. But forex trading isn’t as easy as
it looks.
Social trading, also known as ‘copy trading’, is a way for
inexperienced forex traders to dip a toe in the water. Instead of devising your
own trading strategy, you simply copy someone else’s trades. Platforms like
eToro and ZuluTrade are hugely successful – you can learn more about ZuluTrade
by heading over to https://investingoal.com/ who have written a step-by-step guide for
those who’d like to leverage it.
If social trading
appeals to you, read the following pros and cons before you make a final
decision.
Follow the Experts
The biggest advantage
of social trading is that you can follow someone else’s lead. Rather than spend
months learning the ins and outs of forex trading, just copy a more experienced
trader’s trades and reap the same rewards. Automated software makes this
incredibly easy.
Build Your Confidence
Social trading is a
good way to build your confidence before you strike out on your own. Demo
accounts are great but playing with fake money is not the same as trading with
your actual capital. A social trading account is a useful middle ground. You are
trading with real money, but the risk is lower and you are more likely to make
successful trades on a social trading platform.
Find a Mentor
Having a mentor helps
you to grow as a trader. On social trading platforms, you can take your pick.
Spend time watching how other successful traders work and follow a few. You can
learn from their trading strategies, which helps you to formulate your own.
There are also some
disadvantages of social trading, which should not be underestimated.
No Guarantees
Forex trading is a
risky business. Even successful traders have bad days where they lose money.
Don’t assume that every copy trade you make will be a winner – it won’t. Be
prepared to lose money and have the funds to cover your losses.
Don’t Get Too Cocky
Just because your
social trading mentors are making the right
decisions and you are profiting as a
result, don’t assume that the good times will continue indefinitely. It is easy
to think you are better than you really are when copy trading. Social traders sometimes forget that they
don’t know as much as they think they do. Copying trades may lead to a false
sense of security. Don’t let this happen to you. Spend time learning the
technical aspects of forex trading, so you can spot a bad trade before you lose
money. Experienced forex traders make mistakes too, but if you blindly follow them, you’re
the foolish one.
Use
social trading as a stepping stone on your forex trading journey. It’s a useful
starting point, but make sure you spend time learning the ropes and developing
your own trading strategy.