Social trading has followed the same route as social media over the last few years – in that the trend has grown substantially. In the past, many traders were reliant on discussion forums and groups as a means of picking up trading ideas and perhaps a signal or two. In the current age of social media, many successful traders put their efforts and achievements on display for everyone to see and – in many cases – copy.
Traders today can be divided into two main groups. Firstly, there are those who trade with as much learning and knowledge behind them as possible. They attend seminars and discussions to pick up the basic fundamentals and forex trading tips. Thereafter they attempt to trade in currencies on their own steam. The second group trade to make a profit with little background knowledge. For this group, using mirror methods or copying the strategies of others works perfectly.
There are numerous websites on the internet with an abundance of trade strategies just waiting to be mimicked. Trade copy providers require only a registration by the trader in order for them to easily access multiple trading strategies and duplicate them.
Strategy selection with a lack of information
While traders are quick to follow the strategies of individuals who have lots of followers, that isn’t always the right direction to follow. Having a large following doesn’t equate to being good at trading stocks, CFDs, indices or commodities. It is not always clear how and what the trader you are copying is trading in or if it is in any way similar to your chosen trade item. Investing in any particular system requires you to have as much information as possible and these sites are often lacking in that department.
You may find that many trade copy providers boast about the successes of traders using their systems as an element of the introduction to their site. While this might be true, you must remember that there are likely thousands of users of the systems in question. The pool is considerable and selecting two or three making profits at any time is not a difficult task. Trades and systems change from year to year and what works now might not very soon. Only the good strategies survive and it is these traders that appear successful all the time.
Customer support limited
Personal forex brokers differ from trade sites in that the brokers provide live chat support and even offer a number to call in the event of any trade-related emergencies. Most sites – like eToro, for example – don’t offer this facility. If an emergency situation arises or you have any urgent queries, your best bet would be resorting to Google for answers or seeking the assistance in one of the online investment community forums on the website in question.
Risks run deep
As successful as your trade advisor may be, they are still only a human being who is still susceptible to error. While the strategy or system you are copying may very well be profitable, advisors need only make one minute mistake to upset the apple cart. In essence you don’t ever really know who you are trading with and that in itself is a risk to carry.
Copying trades has its place within the trade community and there are many who achieve success through it. However, it is critical to know the ins and outs before investing in this way.