What is social trading and how does a social trading platform work?

Do you want to know what is social trading and how does a social trading platform work? In this course, we will teach you everything you need to know about social trading and social trading platforms!

What is a Social Trading Platform and How do Social Trading Works?

One of the most recent developments in the trading world is the concept of social trading. Initially, this was found mainly in the currency trading world, but has been adopted by stock traders and commodity traders as well. Essentially, social trading is a place where traders will post their trading ideas, and go back and forth with each other on potential trades. Some places will do it automatically, meaning that there is some type of software that you plug into your trading platform to automatically post positions, while others will rely on you to input your trade.

In theory, this is a great idea. However, in practice it is much different. Most people who look at social trading are looking for someone to make their trades for them. In other words, they are waiting for someone to tell them what to do. Typically, what happens is that the new trader will see somebody in the rankings that has made an astronomical return over the last couple of weeks. However, by the time that person gets that high up on the leaderboard, they almost always turn around and fall hard. You will see things like 400% gains in a week, followed by somebody being wiped out. This is because they do not understand leverage, and the new traders that follow them will suffer the same fate.

One of the best indicators as to how to trade is typically go against what the retail trader is doing. There is a 95% failure rate in the retail world, so typically what you get is everybody going the wrong direction over the longer term. With this in mind, social trading is a very bad idea. When you are using a social trading application, you are trusting total strangers with your finances. Typically, these are total strangers who have almost no experience, or if they do very little. Social trading should be avoided at all costs.