Today we are observing a constant increase of interest regarding stock trading online and other forms of trading online thanks to a variety of services offered on the net by online brokers.
Between those, many people are attracted by a new form of doing trades which is known as social trading.
This article intends to take a peak on this new social world and how to enter it in the most responsible way.
If you already know what we are talking about though and you are more interested about the best ones, you can check this best social trading networks review (click here for more information)
How To Start With Social Trading
Social trading works pretty much the same as a new form of social network.
Just like social networks, you have the possibility to know what your contacts, friends, and famous people that you are “following” are doing and what their thoughts are about some topic.
Only thing now is that the main topic is investing on a trading platform.
Social trading networks are a virtual place where a newbie can follow other experienced pro-trader and popular investors, watching closely their performances, successes, gain, losses and so on.
But, most importantly, you will have free access to a lot of information and resources about trading that you would not receive in other places. Info and rumours circulate freely on these platforms, basically in real time.
Thanks to social trading even the most inexperienced user will have a chance to start understanding how online trading works.
How To Start With Copy Trading
Copy trading is one of the most famous social trading features right now.
Thanks to it, you will take the next step and not only “following” your favourite trader, but also automatically “copying” any operation he or she is doing, so that your account will automatically do the same in a proportional way.
A good way to start would be to look around and find a low risk ratio trader. These traders have usually low profit percentages, but they are usually very careful while investing and follow a variety of rules that will protect their capitals (and so yours too!).
Thanks to this strategy you will not have to experience anxiety about losing money or some high-risk traders whose strategy requires a large amount of money to risk for fast profits.
But there is also another way to limit your doubts as a new trader: opening up a demo account.
How To Start With A Demo Account And Be Safe
A demo account can be an extremely useful tool in your learning experience process and it will allow you to better understand how social trading works and how the others platform’s features work.
In life you usually learn from your mistakes, but this cannot be the case if you are investing your money in a financial asset. So, making practice with a demo account allows you to learn also in this way without being upset by your financial losses, because they will be completely virtual.
As a matter of fact, thanks to a demo account you will have a virtual balance that does not correspond to actual money, but that it will work in the same way as if you had actual money on your account’s balance.
In this way you will see the effects of your investments without worrying too much about your final balance.
A Demo account will also help you in case you’ll have to choose between two or more online brokers and their platforms without having to switch immediately from one service to another.
How To Choose An Authorized Online Broker
As of today, the main risk with social trading, and stock trading in general, is the risk of dealing with a non-authorized online broker.
That is why we need to check all the references and licenses needed on our territory before opening any kind of account with a broker. Memorable examples of these authorizations are:
- CySEC license: it is a license released by the Cyprus Securities & Exchange Commission (CySEC), which is the financial regulatory agency of the Republic of Cyprus. Being Cyprus an EU member, CySEC license complies with the European MiFID financial harmonization, therefore it allows every online broker in possession of it to operate legitimely in every country of the European Union.
- ASIC license: it is a license released by the Australian Securities and Investments Commission, which is the independent commission of the Australian Government in charge as the national corporate regulator for the entire financial sector, online brokerage included. Every online broker in possession of it has the possibility to operate freely in Australia.
- FCA license: it is a license released by the Financial Conduct Authority, which is the financial regulatory body in charge for the United Kingdom. Every online broker in possession of an authorization or license released by this entity has the possibility to operate freely in the entire United Kingdom.
If you decide to affiliate yourself with a non-authorized broker, be aware that there will be high chances of losing your money and be scammed.
A Memorable Example: eToro
When we speak about social trading, we can’t but think about the one who made this formula famous worldwide: we are speaking of course about the famous Israli online broker eToro.
eToro has become nowadays the most memorable example of what social trading is and what it stands for as a social trading platform. eToro’s offer includes most of the features aforementioned, and it has been among the firsts to actually empower the peculiar features related to the social trading world, such as the copy trading option.
It is worth pointing out also the fact that eToro has even its own influencers, but in its case they’re called Popular Investors. They are trader coming from the eToro trading community which became famous because of their successful investments, and they are very important to the rest of the community because of the fact that they are the ones copied the most with the eToro copy trading.