Social trading is one of the newest and most engaging avenues into financial investing and trading for everyday people looking to earn a side income or generate passive income for the future. It’s inspired by the success of social media networks, which have driven engagement online between consumers and industry peers for well over a decade now.
Social trading platforms and applications make it possible for individuals that may be new to trading and investing in the markets to lean on the expertise and knowledge of profitable traders. It’s become a haven for time-poor individuals with increased capital set aside to invest and build a portfolio organically.
In essence, individuals can search for traders that buy and sell the kind of shares and funds they are personally interested in. It’s possible to view the individual page of each listed trader, whose trades are fully documented, ensuring total transparency and accountability. Users can decide to ‘follow’ profitable traders and monitor their activity for a period before auto-copying a trader’s activity within their own account at the tap of a screen.
Not every CFD broker available to retail traders still provides this service, so it’s important for individuals to do their research and find a community that’s active and reliable. INFINOX has a fast-growing social trading community called IX Social, which has over 7,000 active users a month and a total traded volume of $30bn across all active client accounts. At IX Social, there is a real-time leaderboard highlighting the top traders based on daily, monthly, and all-time profits. It has also has discussion groups that allow newcomers to liaise with seasoned traders and get under the skin of the markets.
Possibly. There is no doubt that social trading apps have helped to break the barriers to trading the markets for many novices with disposable cash to invest. Social trading has also provided a form of education to newcomers, raising awareness of the technical and fundamental indicators that profitable traders use to pinpoint ideal opportunities for opening trades.
The best traders on social trading platforms will explain their thought processes within their page. There is a mutual benefit for profitable traders to have others copy their trading positions too. The more users that copy them, the more commission they get from the partnered trading platform for generating more active clients.
However, some believe there is a question mark hanging over social trading platforms too. Critics insist that simply following other traders does not help individuals to learn the dynamics of the markets. They state that there is no substitute for spending time watching the price action in the markets to try and spot trends with your own eyes.
Social trading does carry an element of risk, too. Just because a trader has been profitable before doesn’t guarantee their profitability in future trades. As with all forms of financial investing, the onus is on the individual to implement their own risk management strategy to minimize the downside and maximize the upside.
In truth, social trading may not be a magic bullet to long-term profitability for all, but it can certainly open the eyes of novices to the possibilities of making money across a plethora of asset classes.