Social trading has been in existence for some years now and is growing to be the future of financial trading. For an established business that has been trading for several years or an individual looking to try their hand at an investment platform, social trading is something that can benefit you in the long term.
Many people have lost their money trying to invest in financial markets such as cryptocurrencies. You need to be capable of reading charts, understanding trends and analytic reports, and also be up-to-date with news events affecting the cryptocurrency world. In this article, we will give the benefits of social trading and how it comes in handy in cubing such challenges.
What is Social Trading?
Social trading works on an online platform where traders share their trading strategies and price prediction, allowing investors to observe trading behaviors of the best traders and follow their investment strategies. Social trading platforms give traders with little or no market experience the chance to interact with each other and watch others take trades. They can also copy their trades and learn what drove the best trader to make a trade in the first place. It will help to shorten the learning curve from beginner to experienced traders.
Besides, the best traders can share their knowledge and earn by selling access to their trade predictions. A social trading platform gives them access to a new, global market of traders who purchase their predictions. Traders in cryptocurrency no longer have to go through a brokerage or financial advisor to make trades. However, they can use a social trading platform with transparency and follow an expert to make the same trades or copy the expert’s trades.
Benefits of Social Trading
With a little knowledge of what social trading is, let’s take a look at some benefits you can expect from social trading.
- Boosted Trading Accessibility to all
The main benefit of social trading is the accessibility of trading to all. Social trading works on the principle that everyone should be able to trade regardless of your trading experience.
Newbies joining a trading platform will get very confused and intimidated by everything that surrounds them. A beginner will worry about which asset to choose, whether to buy or sell, when to stop-loss, and which technical indicators to use. All these will get a beginner confused and worried during solo trading operations.
Accessibility is crucial to any investor, and the benefit of social trading is increased availability of information, which means that you, as a trader will be able to take advantage of helpful leads that will help you in making investments.
- Free of Charge
Another benefit of social trading is that it doesn’t cost you anything to interact and learn on social trading platforms. You have quick access to all the information that you would need.
You are only required to sign up for a free account, and you can access the strategies of top traders without even making a deposit. Cool, right?
Social trading platforms have eased the flow of information, having gathered a social trading community of pro traders around the globe. With a personal free account, you can explore the social trading community without any restrictions.
- Reliable Information
Apart from social trading being accessible and free, reliability is also critical. With a simple search on trading strategies on the internet, you will encounter thousands of articles. Not all sources provide any proof or visible results you can rely on.
But in social trading platforms, you can view the entire portfolio and trading history of other traders. You can use some of the information to your advantage like, how much profit they’ve made over a certain period, which trades made them money and which ones caused them to lose money. Building trust in social trading increases transparency.
- Friendly to Beginners
Social trading only requires a beginner trader to join the social trading network and start following the pro traders. Beginners gain useful experience by following their trading actions. Following up and learning trading knowledge without practicing, it is better than trading first-hand.
After learning faster and getting the best strategies and tips of trading, newbies eventually become experienced traders themselves.
Also, social trading is fast, hence proven to save time and money for beginner traders to become professional traders themselves. Also, the fact that no extra charge or fee is needed makes it a better choice for novice traders.
- Diversified Strategies
Trading sometimes gets you performing individual trading operations under your terms and with strategies that you have already tested yourself. Nonetheless, you won’t be able to calculate all possible outcomes of trading by yourself regardless of your level of experience as a single trader and the number of various strategies.
Traders, more than often, neglect the sharing of ideas, which can aid you in getting an essential aspect of trading or a potentially successful trading strategy you haven’t heard off. In social trading, traders can discuss their way towards observing a particular situation in the market from several angles that way, presenting diversity in trading strategies.
- Added income For Pro Traders
Top traders not only benefit from just limited profits from their trades, but social trading platforms also earns them a percentage of Assets Under Management (AUM) or earnings of the traders that copy or follow them. The more followers/copiers for the top traders mean more additional income. Social trading lets everybody benefit from it, thus creating a favorable trading ecosystem.
- Being Part of a Community
Social trading brings together a community of seasoned investors, thus creating a massive plus in the world of trading. It provides a social network where you can seek support from many different non-proclaimed pro traders.
One of the best advantages of social trading is that you can share and exchange ideas, and information hence joining many potential collaborations with other investors.
- Risk Reduction
Trading comes with its own risks; social trading, however, eliminates the risk of trading by yourself and risking your money, especially if you are a newbie. It enables you to assess your risks and helps in risk management.
Also, before trading, the use of market sentiments can indicate if the majority of the traders are buying or selling. Besides, traders can view their top trader’s risk score and decide whether to undertake a risk.
Setbacks with Social Trading
Some of the disadvantages of social trading platforms include:
- Varying trading fees – these fees vary widely and can be confusing to a beginner. Trading fees are based on spread depending on the coin.
- Minimum deposit amounts – social trading platforms set the deposit amounts and trade minimums. Generally, starting trade on some platforms requires a minimum of just $1000 or more.
- Lack of trust – traders’ profiles on these social platforms gives their history and success percentage. However, if you copy a trade and it goes wrong, there is no accurate system of accountability. You take a loss.
A crypto-based platform like Shrimpy solves these disadvantages. Check out our full review here and learn why Shrimpy is the best.
Social trading helps individuals make better investment choices through the power of the community. Social trading offers both beginners and professional traders the chance to trade in cryptocurrencies with minimal chances of failures. If you are venturing into crypto trading, social trading could be an excellent starting point, and you should try it out, to minimize your risks.