What is the most important during trading on Forex? Of course, transaction system which provide a maximum return rate. It seems to be a simple matter, but it requires to gain experience, knowledge, capital, indicators test, etc. A whole bunch of things, but the result is still uncertain. With help comes social trading, called the new dimension of Forex.
Idea of social trading upraise
Social trading idea was created in the United States (most developed capital market in the world) and consists on imitation of the best traders in operation, oriented around the broker platform creating a common database to establish this type of cooperation. Just an individual account in the intermediary service is needed to have an instant access to free top traders signals on currency market. Why the best provide their own, profitable strategies? Awards offered by brokers, inflow of sponsors, prestige, creation of individual brand and pure solidarity are most often a reason. Share of knowledge is well-known in the Forex environment. Even before the social trading era Forex fans were users of trading forums, particularly closed threads.
Copying a chance for profit, without specialized knowledge
Social trading fits perfectly into the potential of social media era, attracting a huge amount of inexperienced customers imitating the best investment behaviors. Unfortunately social trading has a defect, affecting just “mindless” copying, without individual initiative. Although trader knows the signal, he doesn’t really know on what basis was composed, and that indeed is a key to independent success. Therefore, you cannot neglect your own development. Brokers are familiar with this problem. That’s why they promote free courses, run blogs, educational channels, simultaneously encouraging person with the highest return rates to describe used strategy.
Who and how benefits from the social transaction model?
Interesting platform intended for social trading generates signals from the best profiteers, but simultaneously enable to follow opposite positions to movements of the worst market participants. Such an approach we call as the contrarian strategy. Most often also the inflow of signals can be automated in a dedicated investment platform.
Brokers mostly benefit from this idea development, since they make a profit on maximization of the customers number as well as through a large turnover. The best investors are motivated by promotions, low spreads, job vacant, interviews, additional financial support, possibility to build own team. It is worth not only to follow the best, but also to be such a trader.
Trouble with signal selection
The biggest problem raises a choice of trader, whose transactions you will want to copy. Historical results and “followers” number aren’t very measurable indicators. It is necessary to devote quite a lot of time to capture a winning streak. Instead on knowledge the social trading is based on confidence. It is an unusually variable, uncertain value. In described trend we can see the high profit ratio to risk, and it is already a step to connect own system with traders premium systems. The best platforms provide advanced filters, thanks to which you assess the risk of copied signals.
Common objective is a Forex binder
Investors no longer compete, but cooperate in order to achieve measurable financial benefits. Development of social speculation methods is a trend with great prospects for growth. All popular brokers provide this type of offer, seeing the only right direction of classic platforms evolution. Forex becomes the most well-known market thanks to social activity in the world, directed to persons who want to get rich quickly.