If you’re considering opening a social Forex trading account, you may be overwhelmed by all of the traders you can follow – but you shouldn’t be. When it comes to choosing a trade leader (or leaders) to follow, the more options you have, the more likely you’ll be to find a successful trader that will lead you to profitability. We’ve aggregated a list of some of the most successful social traders to help you get started and to make the process as easy as possible. Forex trading is complicated enough – choosing a trade leader shouldn’t have to be.
More About Social Trading
What is Social Trading
Social trading is the term used to describe Forex trading that is done in a social setting, wherein the traders can correspond with each other via the trading platform to get advice, ideas and trade suggestions while they automatically copy ideas from other Forex traders. Social trading can be done directly through the trading platform or across social media platforms, depending on the broker.
Though all social trading platforms are based upon the idea that traders can benefit from following others, there are actually several different types of platforms and dozens of different brokers that offer these services. There are three basic types of social trading platforms.
Screenshots of eToro social platforms
Copy Trading
Copy trading allows you to copy any other trader's trades directly into your trading platform. In straight copy trading most traders make decisions to follow based upon the trade strategies employed by the trade leaders.
Check out best copy trading platforms of 2019 here.
Social Trading
Social trading varies slightly from traditional copy trading because it adds a layer of social data to encourage traders to choose a trade leader based on aggregated social data rather than trade strategy alone. In social trading platforms traders can also interact with each other to better understand the trading process and to enhance their knowledge of the markets.
Check out best social trading websites of 2019 here.
Mirror Trading
Mirror trading enables traders to evaluate and follow specific trading strategies and signals from other traders. With mirror trading, traders can build a strategy based upon back-tested strategies and can opt to implement the trades of multiple traders simultaneously if they are in keeping with the trader's overall strategy.
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Things to look for when choosing a Social Trading Platform?
In a sense, choosing a social trading platform is slightly more complicated than choosing a regular Forex trading platform. In addition to looking at all the usual features, such as regulation, spreads, leverage and pairs offered, it's highly important to look for a platform that has an ample choice of traders to follow, and of course, traders that you feel comfortable with
Other features that you should take into consideration
Key features
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Minimum Deposit: - Though many social trading platforms have a low minimum deposit (perhaps as low as $100), it is important to consider that you will likely need significantly more capital in order to test different trade leaders' strategies and to find which once work best for you.
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Currency Paris: - Not every broker offers trading access to the same currency pairs. If your trading strategy is focused around a specific pair or group of pairs, make sure that it is available and that an ample number of trade leaders trade that pair so that you won't feel compelled to follow a trader that doesn't utilize your preferred trading strategies.
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Regulation: - There are many new social trading Forex brokers that are opening regularly but lack regulation that can protect your funds. Make sure to check the regulatory status of any potential social trading broker thoroughly before depositing.
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Charges, Spreads and Fees: - While there isn't usually a charge associated with copy trading, there is almost certainly going to be a fee associated with the trade execution. In addition to the spreads which are charged by every Forex broker, some brokers also have withdrawal charges and other hidden fees (such as overnight fees) that can impact the income you'll enjoy from each trade.
Just as there are many Forex trading strategies, there are many strategies to consider when picking a trader to follow. When it comes to social Forex trading the most obvious way to choose a trade leader is to choose one that has the highest income or the one that has the most followers (or, perhaps, a combination of both). However, it is just as important to consider what the trader's trading strategy is, what the risk to reward ratio is and how often trades are placed (among other considerations).
If you're not the type of trader that can handle dozens of trades per week, look for a trade leader that makes fewer (and possibly more well-thought-out) trades. If you're looking for someone who uses specific strategies or trades specific pairs, it's worth researching trade leaders that make these offers on different social trading platforms so that you'll feel confident that you're making the right decision. Don’t feel obligated to look for trade leaders only in one specific platform – it may be that the leader you're looking for is not where you'd most expect it.
If you're opting for a social trading platform rather than just a Forex copy trading opportunity, also consider the responsiveness of a potential trade leader. Do you feel confident in his or her abilities? Does the trade leader answer your questions appropriately? In a timely manner? When embarking upon a social trading plan, trust is a critical factor, so take time to really get a feel for the trade leaders and what they offer.
It's easy to become an over-eager trader when embarking upon social trading. You may get caught up in the idea that 'everyone is doing it', and that you can or should do it too. But this peer pressure is the biggest danger – and the one that is most likely to turn you into a foolish follower rather than an intelligent copy trader.
When opting to try Forex social trading platforms, stay focused by outlining your long term financial goals, specific trading strategies that you believe will be successful and not being afraid to realize that loss is normal on the way to profits. Just because a trade leader has more experience than you do doesn't mean he or she is immune to loss. Keeping a realistic understanding of what social trading offers will allow you to stay on course rather than getting swept up in the moment and heading for failure.
Forex copy trading is a service through which traders can opt to implement the trades of more experienced or more successful traders. All Forex copy trading platforms allow their clients to automatically copy another trader's executed trade into their own trading platform. In most Forex copy trading platforms, all decisions made by the lead trader are copied into the client's platform. For example, any stop loss or take profit orders set by the lead trader will be implemented in the copier's platform as well. Trade copiers are able to disconnect from the leaders' trades as well if they wish. Forex copy trading is frequently referred to as social trading as it adds an interactive element to Forex trading which has traditionally been an independent pursuit.
In Summary
There are hundreds of traders worldwide who have built effective Forex trading systems but haven't landed jobs as analysts for brokers or technical analysis websites. Forex social trading systems allow these traders to share their strategies and success with others in a personal, comfortable forum. In this respect, the advantage of social trading systems is unparalleled. On the other hand, social Forex trading also allows less-successful traders to broadcast their trades and to garner popular support – even if it isn't warranted. When evaluating whether a social trading system is right for you, consider whether you'll be able to separate fact from fiction and real success from one-time wonders so that you can find the real trade leaders to socialize with. .
Read more here on how to choose a Forex trading broker