Social trading, trading signals, PAMM/MAM accounts are all social trading functionalities that involve earning money on the Forex market without having to decide on whether to buy, sell or close your trade. The idea behind social trading is that traders can capitalise on other successful traders’ knowledge to make smart investment decisions. For example, a trader may view other traders’ portfolios, track their overall performance and get a better understanding of their trading strategy. This method of trading has increasingly become popular among both novice and experienced traders – newbies can follow savvy investors while advanced traders can refine their own trading strategy and expand their portfolio further.
Overall, the benefits of social trading can be summarised as follow:
- start with a small investment
- access to international markets
- diversify your portfolio
- connect and follow other talented traders
- copy their trades automatically and learn from them
- save your time
- easy to use with a social interface
Choosing Signal Providers
Social trading requires you to spend some time learning how to pick signal providers. In a previous article, we outlined some rules for choosing a signal provider. Here is what you need to consider:
Never risk money you can’t afford to lose
No matter how successful a signal seems to be, it is important to bear in mind that the forex market is incredibly dynamic. Unforeseen events such as physical disasters, Central Bank decisions and political situations may spark ‘explosions’ in the markets and notwithstanding the system you choose to copy, your profitability merely depends on luck.
Think which is the best strategy for you
An ideal investment strategy is the one that satisfies the following criteria:
- The strategy is well-tested and has been in the markets for several years
- The strategy is stable
- The money manager uses Stop Loss
All in all, social trading is based on the idea that collective wisdom is more effective than individual acumen and new traders can capitalise on this rewarding way to trade the financial markets.
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Losses can exceed the initial deposit.