Social Trading

Social trading is a relatively new method of trading in which retail traders buy or sell financial instruments based on information provided from fellow financial traders.

Typically, a less experienced trader gauges information shared by more experienced traders, who often have demonstrated a successful record, and places their trust in their superior knowledge.

While the rise of social networks such as Facebook and Twitter have accelerated this form of trading.

There are now many dedicated standalone social trading platforms which are proving to be very popular with traders.

Social Trading Providing Benefits to Traders

Social trading essentially attempts to remove the steep learning curve which accompanies financial trading, which is traditionally traded using technical and fundamental analysis.

Technical analysis involves the use of mathematical based visual tools and indicators to assist traders in deciding, such as Fibonacci, MACD, and RSI.

Fundamental analysis is the observing of geo-political events and economic reports and understanding how they affect trader sentiment.

Proponents of social trading claim these forms of studies and education are not necessary.

This is because traders can simply view and share key information and details with other traders, allowing anyone to make an informed decision on whether to buy, sell, modify or exit a trade.

For example, a trader who specializes in commodities could share useful details about the current state of gold, where as a currency trader might have more knowledge about what the US dollar is doing.

Critics of social trading claim that it’s merely the blind leading the blind. These critics suggest that social trading sites and platforms such as Zulutrade, eToro, and others, ultimately fail in delivering long-term success.

This they argue results in new traders having initially placed a lot of misplaced faith, losing a large chunk of their investment.