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What really is Social Trading?
Social trading is a form of trading that involves watching the behaviour of peers and expert traders. Following or repeating the tactics of those in social trade necessitates little or no experience of capital markets.
Social trading has been characterised as having the ability to threaten the entire wealth management industry. Prior to the advent of social trading networks, making an investment decision demanded good analytical or fundamental research skills. Social trading has given new types of traders another way to make decisions. Social trading is often thought to shorten the learning curve for aspiring traders.
The eToro website, which has been in operation since 2010, is one of the most well-known evangelists in social trade. The network claims to help democratise financial literacy and bring more earning options to a greater number of individuals.
Social trading can be divided into two types: copy trading and mirror trading.
- Copy traders place exactly the same single trade as other trader they are following
- Mirror trading means following all the activities of another trader and execute all of their trades automatically
Transparency is a central function of social commerce. Social trading websites show traders’ open and closed positions, as well as their stats and success measures. Some sites often encourage users to get updates if a trader they are watching takes an action. The aim is to provide as much information as possible to users of social trading platforms so that they can make better trading decisions using social trading tools.
Social Trading in Crypto
Many consumers now have easier access to investing thanks to cryptocurrencies. The lack of the need for brokers, as well as the lack of other structured criteria, has drawn a whole new group of possible traders. Many inexperienced traders plunged themselves headlong into the crypto trading land of new riches, never looking back. Many individuals have lost money as a result of a lack of simple technical research skills, such as reading maps, and becoming victim to speculation.
Social trading is thought to be capable of mitigating risks in a competitive and erratic market like crypto trading.
New traders can learn by imitating the techniques of more seasoned traders. The openness of social trading will assist them in comparing methods and selecting their trading style over time.
Having a set of different trading steps and their outcomes over time will assist traders in determining the best strategy and, as a result, reducing their own trading risks.
Last but not least, crypto social trading can be an alternative source of income for experienced cryptocurrency traders.
For inexperienced merchants, social trading is a valuable resource. It enables them to take advantage of the trading community, shortening their learning curve and lowering risk while making a trading decision. Social trading is an excellent entry point for those new to trading as well as a way for experienced traders to supplement their income when giving back to the crypto trading culture.