Thursday, December 24, 2015

Is Social Trading Here To Stay?

Recently, I came across a term called "social trading" and have not much clue about what it is but basing on my active involvement in the social media scenes like Facebook, Twitter etc, I sort of guess that it is making use of the power of social media to facilitate the trading activities. 

According to the Wikipedia, Social Trading is defined as:
"The process through which online financial investors rely on user generated financial content gathered from various Web 2.0 applications as the major information source for making financial trading decisions"
So, it is not that far off from my own definition ;-)

Upon further searching, it seems that Social Trading has been around for quite a while and many of such Social Trading platforms (one example is copyop social trading) are promoting the "copy and trade" model i.e. copying/following other successful traders' (gurus') trades and do the same thing. 

It sounds easy but of course, just like any other strategy of trading/investing, there are always pros and cons. Following are some of my pointers:

Pros of Social Trading :

1. Save Time - You could rely on the successful traders and mimic their trades within seconds (with a catch, see point 1 in the Cons category below)

2. Fun Time - You could have fun trading experience with the added layer of interaction with your online peers/social circle.

3. Minimal Capital - Most of the Social Trading platform allow you to get started with a rather small capital e.g. 100 bucks. 

Cons of Social Trading:

1. Nothing Is Guarantee - Even the successful traders can be wrong, so, avoid following blindly.

2. Rush Into Action - You might rush into taking trading action without much thinking due to say, peer pressure or showing your "support". 

Having said that, I personally think that Social Trading is here to stay but it is not for everyone, always do your homework before taking the plunge. If you like to learn more about Social Trading, check out the site called Social Trading Guru

Meanwhile, following are a couple of Dos and Don’ts if you are planning to take a plunge into Social Trading:

Dos of Social Trading:

1. There are quite a number of social trading platforms/apps in the market, always do your homework in establishing the reliability, stability and usability of the platform/app. 

2. Read the full Terms and Conditions of the use/restriction of the platform/app in your country, if any.

3. Understand the process or charges involved to cash out/redeem your profit before you do your first trade.

4. Set aside a portion of your investible fund for social trading only i.e. not to put all eggs in one basket. 

Don’t of Social Trading:

1. Follow the winning traders blindly. If possible, try to interact with the traders and understand more of their trading rationale, take action only if it strikes a chord with you.

2. Don’t get greedy. One or two winning trades will not guarantee any of the future trades. Trade responsibly and never trade beyond your means. 

Do you have any experience in social trading? If yes, what is your experience so far? 

Cheers!

4 comments:

  1. Simple form of social investing - follow your favorite bloggers!

    ReplyDelete
    Replies
    1. CW8888 : That's true, that's why ur blog is popular ;-)

      Delete
  2. Interesting, I guess InvestingNote is considered a form of social trading.

    ReplyDelete
    Replies
    1. Personally I view InvestngNote as niche social media (focusing on investing), to be a social trading, the platform/app need to be integrated with the actual trading platform.

      Delete

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