Forex trading, which you’ll often also see referred to as “foreign exchange trading” or “FX trading,” entails speculating on the price of a currency to make a profit. You’re converting one currency into the other. Since currency trade occurs in pairs, you, the investor, speculate that one will either rise or fall in value against the other. Price movements can be extremely volatile in the forex markets due to the influence of trade flows, economic events, political events and geopolitical ones. All of this creates some fantastic opportunities for investors.
One style of investment you might come across if you’re investing in the forex market is social trading, which enables inexperienced investors to copy the traders of other, more experienced ones. Below is a deeper look at social trading, with insight into why people engage in social trading, the importance of a good social trading platform and what makes a good social trading platform.
Social trading and why people engage it?
A lot of traders perform their own analysis, but some traders prefer to observe the analysis of others and replicate it. Some consider social trading a type of network because it makes it possible for traders to interact with other traders, watch each other’s processes and learn how to make decisions.
Social trading works by creating quick access to financial markets. New technologies have made it easier than ever before. A trader can use a comprehensive trading platform, or just take away individual elements of the practice.
Some people take part in social trading because they don’t know the market well enough or which broker to choose. They can access shared knowledge about the basics of forex trading and about the more theoretical and technical aspects of it.
Inexperienced traders who haven’t developed their own strategies can copy the ones of more experienced investors. By studying their strategies, they can shorten the learning curve, earn money and make better decisions.
Don’t assume that only inexperienced investors take up social trading. Seasoned investors also find it handy because they can gain new insights into financial markets.
When you’re speculating with forex, you need a good platform to do it on. Forex investing can entail speculating with large amounts of currency, so you’ll need a platform that can cope adequately when it comes to processing transactions. The forex market also moves fast, so you’ll require a platform that will allow you to conduct transactions quickly.
The fact that you could be working with large amounts of currency means you should have access to all the tools and information possible to make the right decisions. Good trading platforms will provide you with everything you need to help you evaluate whether a trade is working or not. You’ll also be able to gauge whether a trader is a good one to follow. Basically, information is power.
Understanding what makes a good platform
What is the best social trading platform? How do you know if you’ve chosen a good social trading platform? Here are some of the features you should look out for:
The platform should look strongly like a social network and provide you roughly the same features. You should have your own profile and be able to like, comment and keep a blog of your activities. The best platforms will also have forums for you to interact with other users and learn more. Good forums will have lots of users, rather than just a handful.
The platform provides key information about traders
Naturally, you want to copy good traders, not bad ones. A good social trading platform will offer key information about traders, such as their trading performance, portfolio, risk criteria and other vital information. All of this is necessary to understand how good (or bad) a trader is.
The platform makes it easy to open an account.
Some platforms ask you to make a minimum investment, while others don’t. This is something you should check before you open your account. Good platforms will offer a demo account so that you can learn how the platform works and practice making trades without any risk.
The platform has fair trading fees
Some platforms can charge as much as 50% more at one broker than another. Ideally, you want to be paying the lowest fees possible on your trades. A good platform will charge you a fair fee, not an extortionate one.
Social trading is a way to learn about the forex markets, how to invest successfully on them and to build contacts. Choosing the right platform will make it possible for you to achieve all of this.