When you start looking for trading options, you will need at least a couple of days to study the different types of trading systems that are available for a trader. While there are many options, the majority of trading systems have been criticized for not being financially inclusive enough. That’s one criticism that forex social trading never had to face. Visit mex
Social trading is a type of online trading that gives scope to new or novice traders to replicate the trading practices of well-established traders. While it gives new traders the opportunity to grow, it rewards experienced traders for sharing their methods and processes.
While the amount of risk involved in social trading is much lesser than the kind you encounter in several other trading forms, you should not make the mistake of believing that it offers you a risk-free proposition. Since you will be relying on the judgment of a third party, there will be a certain amount of risk that you would have to deal with.
Even if you opt for social trading, you need to have some knowledge and understanding of the financial markets. You might come across brokers who will tell you that you can jump into social trading without knowing anything about trading or the financial market. You should never let such people misguide you.
Regardless of which type of trading you go for, you will be a trader at the end of the day. Financial markets and risk are intertwined with each other. To negotiate financial markets, you will need to keep learning new things and make a conscious effort to enhance your skills.
Apart from possessing a certain amount of knowledge, financial markets require you to have a tremendous amount of patience. Things will not be smooth all the time but you need to be perseverant and remain focused so that you see better days in the future.
Once you make peace with the fact that there are a bunch of risk factors involved in social trading, you will have to find ways to safeguard yourself against them. You must speak to your broker and work towards putting together a risk management strategy. A good strategy will help you ensure your safety in forex social trading.
How To Start The Process
When you decide to get into social trading, it is imperative that you find the right platform for it. A good trading platform will help you reap the benefits of engaging in social trading. It is, therefore, important to do some research on various trading platforms that support social trading.
The biggest advantage of engaging in social trading is that it gives you the opportunity to be a part of a large globalized community where trading ideas are shared with each other all the time. Social trading plays an important role in putting together purchase and sell signals or indicators of trades.
Here are some of the factors associated with forex social trading you should know about while starting out:
Trading Signals
Most people are aware of the fact that social trading enables traders to purchase and sell strategies put together by other traders. While this helps you to trade efficiently with little preparation, it also stops you from getting in-depth knowledge of the financial markets. Also, you must remember that following the footsteps of an experienced trader doesn’t guarantee success.
For a forex social trader, technical analysis is very important as it helps you figure out the right time to trade across a variety of markets including indices, commodities and forex. The signals feature of the platform offers you buying and selling suggestions or options from third-party providers. These providers have a look at the market for you and help you with their professional expertise.
If you are interested in doing detailed research, you will benefit greatly from the signal service. It helps you make well-informed decisions while ensuring that you don’t lose control over your trading processes. You can create trading strategies based on your requirements and objectives.
Market Segment Indicators
When you engage in social trading, you would want to know about the trends followed by experienced traders. The best way to do that is to check market sentiment. It represents the mood or the inclinations of the participants in the financial markets. It can also give you some idea about the kind of trading activities taking place at a given point in time.
Getting an idea about the market sentiment is an important but difficult process. There are a plethora of factors that come into play here and you have to take some steps to ensure you are moving along the right track.
Here are some of the ways in which you can gauge market sentiment:
- The Volatility Index
The volatility index or VIX keeps a tab on the option prices and takes into account the stock market’s implied volatility. Contrary to popular belief, the VIX does not give you an inkling of the price direction. It tells you the extent to which the market is volatile at a particular moment. If the implied volatility is very high, it means there is a lot of apprehension about a current trend.
- The Commitment of Traders
The Commodity Futures Trading Commission publishes The Commitment of Traders (COT)report that gives one an idea about the speculative traders’ positions. This particular report is published once a week, mostly on Fridays. It also enables the trader to gauge the market’s attitude at a given point in time.
When you get into social trading, you will try to replicate another trader’s plans or deals. There is nothing wrong with that. In fact, social trading has been designed to ensure that new traders find it convenient to replicate experienced traders’ deals. However, with time, you should develop your own instincts and have the courage to trade independently.
You can observe a trader and replicate what they have done. However, you must remember that their plans are most suitable for their goals as traders. To achieve your trading objectives, you should devise your own plan of action.