Many have argued that the future of online trading and investing will largely be shaped and defined by social trading as the penetration of this phenomenon into the markets has been phenomenal. Millions of people have already hooked up onto a social trading platform, either as a follower or a trader that others follow. Social trading has truly transformed the way most people are now approaching trading and the whole concept of their money management and this largely attributed to its two basic virtues of openness and transparency, which traders find particularly appealing. And of course all traders value not only the ability to copy and mimic the investment decisions of others but also the chance to come together, interact, exchange views, to guide and be guided in a community which shares the same aspirations.
It is almost undeniable that social trading does offer distinct advantages and opens up numerous potentially lucrative opportunities for all traders who wish to go down this lane, however achieving successful trading decisions and accomplishing high returns through a magic recipe or by moving a magic wand. Instead, trading success can be attained through the analysis of markets and the identification and forging or trading strategies that in turn will effectively dictate one’s trading decisions that are tailored made and best match the individual budget and trading goals of each trader.
What follows is some practical, hands-on advice of ways that one can make the most effective and efficient use of the tools provided via social trading, in order to see their profits hike. The examples are drawn from the hugely popular, leading broker and social trading pioneer eToro and aim to demonstrate that by using the tools provided in the right way can truly maximize the trading gains of any trader.
First off, it should be stressed that managing to become a successful and effective social trader entails devoting enough time to thoroughly explore and learn to use each and every one of the tools contained on the social trading platform, in this particular case, the multitude of tools that are encompassed on the New Etoro platform that was first launched in November 2015.
The cornerstone of engaging with social trading online is connecting to other traders in the community. With over 5 million registered traders eToro offers truly myriads of options to choose from. However, the sheer volume of prospective traders to copy from may be daunting. To facilitate your search and help you narrow down the results according to your preferences, you can use the People search tool, which allows you to filter traders by country, markets, profitability and time periods. Once you have in mind the characteristics or type of profile of the traders who you would be interested to follow, you can adjust the searches you perform accordingly and end up with a pool to match those characteristics from which you can then make your final pick and then easily set your account to automatically copy all their trades.
Therefore, the first and foremost type of analysis to engage in when entering the world of social trading is a People search to identify the “popular investors” that are right for you to follow and mimic. Every social trader and every popular investor on e-Toro has their own personal profile, which includes a News Feed, a Portfolio and trading related statistics. A profile’s News Feed shows the owners comments and discussions with other traders and is very indicative of how well a trader engages with the wider community. The Portfolio part of a personal profile in turns details all the Popular Investor’s open trades at any time, while the Stats data give a clear breakdown of their trading activity and average risk levels. EToro provides you with all these resources in order to ensure that you are able to form a very clear picture of each potential “guru” that you think of copying and be able to identify those who you think have the more potential to be successful and help you achieve gains if you copy them. Interaction is allowed and indeed encouraged, so it is a good idea to ask any questions you may have before deciding to follow and copy any particular trader. Choosing who to copy is the most important decision you are called to take when using social trading so any time and effort you spend on this procedure is an investment that could save you, or even better make you a lot of money in the future. In terms of traditional trading, approach this with the same caution as you would select which asset to trade on.
Effectively using the people search to locate Popular Investors to copy across the whole markets spectrum, each specializing in a different market, investment type or asset category will enable you to obtain a truly diversified portfolio. This is a very effective risk management method as a diversified portfolio minimizes the danger of losing all your funds if a specific market or asset performs badly. In short, having a balanced portfolio, i.e. not putting all your eggs in one basket, can be very clever and it is perfectly doable through social trading since it doesn’t entail your personal knowledge for each different type or market. It is however, also a great opportunity to learn all about the different markets, assets and investment types, even those you are not at all familiar with, through your interaction with the expert traders in each field.
Even if things go wrong, which is inevitable to happen at some point, learning to use the copy stop loss tool provided by eToro effectively will mean that you don’t need to constantly monitor your copy trades but you can let me run since you will have already set an automatic stop loss on them. This will make your account automatically stop copying the trades of your chosen popular investors in case they start to lose more than you can afford.
One of the best things about social trading is the room it leaves for personal development. You may enter it completely ignorant about trading and simply mimic the moves of others but it allows or even encourages you in time to increase your knowledge and enhance your trading skills through interaction with other members of the community. The e-Toro platform allows you gradually build up your very own personal profile that will reflect your performance and all your interactions with others. In time and as your skills develop and improve your profile may become attractive to other traders who will be coming to you for advice or even to copy those you copy or the trades that you will be placing yourself. Before you now it you may change hats and become a guide instead of a follower and it is possible that you can turn into a popular investor yourself, with your own group of followers who will also bring another welcome injection to your income and also offer you a real sense of gratification and recognition.