Binary options trading has become popular as it offers a good payout. Also, with this trading method, several traders have made a huge profit. And the fact that binary options trading is easy to execute is attracting more traders.
Unlike other tradings, binary options trading is not complicated. That’s because it is based on a simple proposition of yes or no. To win a trade, you only have to speculate whether the price of a given asset will go beyond its fixed value or not.
Besides simplicity, another thing that keeps traders interested in binary options is the different features that brokers offer, like social trading.
It is a new way of investing in the options market, and it can increase your profitability. But don’t be mistaken- social trading is not helpful until you know it inside out.
So, what exactly is social trading? Why should you choose it? What are its benefits and limitations? And how can it help you? Well, you will find all the answers to these questions in this post.
What is Social Trading?
Social trading is a new way of trading in the binary market where traders can analyze the trading behavior of experts and their peers. In simple terms, it can be seen as a social network where traders share their ideas to make a significant profit.
Whether you are a new trader or have experience, social trading can help you know the trading moves of other traders so that you can follow them. Usually, this feature is used by traders who don’t have enough time to analyze the market independently.
This form of trading lets the trader establish a global connection to utilize the relevant information. Social trading makes binary options trading a lot easier, but there’s a catch. Since you depend on the trading data provided by the public and not the broker, you must stay alert.
After gaining popularity, this trading feature has faced some backlash. But it’s safe to say that social trading is here to stay. It is getting more popular among new traders as it helps them understand how profitable trades are made.
Additionally, social trading has chat rooms that make it easy for traders to ask questions and learn about trading.
How Does Social Trading Work?
Social trading is simple. First of all, you need to look for the right trader that meets your trading needs.
When you are looking for a trader, don’t forget to check their past performances. That’s because their performance report can help you learn whether or not their trading strategies are successful.
Once you have found a reliable trader, you can easily copy their activity in one click to follow their strategies. You can also take the help of copied financial data to create a winning strategy of your own. Either way, the data will help you.
But is social trading legal? Well, this form of trading is legit, and more than half of the brokers offer this feature to traders.
To know about the latest trading strategies, you can join chat-based workgroups or social-media signal groups. These groups will keep you up to date with what’s trending in the binary options trading market and what kind of strategies are effective for them.
Why Traders Like Social Trading?
Although social trading is getting popular, there is a risk of losing money. Then why do traders like this feature? Here’s why traders like it.
It Saves Time
Social trading is all about copying the moves of expert or peer traders to increase your chances of profitability. Since you are replicating other trader’s moves, you don’t have to spend all your time analyzing the charts and market trends.
This way, you can trade more often in the market. Meaning you can make more money than usual. So, using the social trading feature makes sense as it saves time and increases profit.
It is Transparent
While copying the moves, you can view the trading decisions, success/fail ratio, trading history, gain, portfolio, and other important trader information.
Besides this, some platform also tells about the trading habits and risk of the available strategies. This information can help traders to make informed a decision.
It Helps You Gain Experience
Even if you are a master trader, you can’t trade successfully in every asset like stock, commodity, and cryptocurrency. Also, each trader is specialized in trading in specific geographical markets.
However, you can expand your knowledge and decrease your chances of losing while investing in a foreign asset or location by copying the strategies of other traders. Social trading is an easy way of exploring new possibilities without having a greater risk of losing money.
You can Experiment with Different Trading Styles
While social trading is mainly used when traders don’t have enough time to analyze the market, it is also used by experienced traders who want to try different trading forms.
For instance, if you are an expert trader who wants to try short-term trading styles like day trading, you can copy others to take a quick decision. By using the social trading, you can break from your usual trading style and try something new.
Popular Platforms that Offer Social Trading
As you know what social trading is and how it’s done, it’s time to learn about the popular brokers that offer social trading. Here are a few of them.
eToro is a safe and regulated platform that has become a popular choice among traders for social trading. It is a profitable broker that helps traders make money by offering them excellent features like copy trading, news feeds, and demo accounts.
eToro was launched in 2006, and it offers different kinds of assets for trading like commodities, stocks, forex, social trading, indices, cryptocurrencies, exchange-traded funds, and more.
For starting a trade with eToro, you are required to make a small deposit of $200. It also charges inactivity fees. eToro is the first choice of beginners and traders who wants to learn everything about copy trading systems.
Another popular broker that offers social trading is Spiking. It was launched in 2016, and it has more than thousands of users. It uses Blockchain Spike Protocol that helps traders to follow market trends accurately.
When you are trading with Spiking, you get a quick notification whenever your friends buy or sell stocks. It also does real-time investor tracking.
A social trading platform that is made for both- professional and new traders is PrimeXBT. It was launched in 2018, and it offers live chats and email options as customer support. To get access to this broker, you need to make a small deposit of $60.65.
Although there is no demo account available with PrimeXBT, you get an opportunity to trade different assets like forex, commodities, indices, and cryptocurrencies.
One thing that makes PrimeXBT so popular is the reduced risk option that comes with it. That means new traders can quickly start trading like experienced ones.
If you are looking for a trading platform that does not charge any minimum deposit amount, TradingView should be your pick. It is a cloud and web-based platform that comes with unique trading features for professional and new traders.
TradingView allows traders to copy the trading strategies that can be used to trade any asset in the market.
AvaTrade is another popular platform that is widely used for social trading. It is regulated, and it also offers fixed spread forex trading.
With the help of AvaTrade, you can do real-time copying of trade and can use it. To get access to this trading platform, you need to make a minimum deposit of $100.
AvaTrade was founded in 2006, and it offers different assets for trading like forex, crypto, commodities, EFT, bonds, futures, and indices. Moreover, it provides live chat, email, and phone as customer support.
ZuluTrade was launched in the year 2007 and has become a popular trading platform ever since. It is integrated with some fantastic features. For example, it comes with a tool that you can use to check the trader’s performance.
ZuluTrade is a user-friendly platform that does not require you to deposit money to start a trade. But it charges inactivity fees.
These tools are available on different devices like iPhone, Android, desktop, and iPad. That means you can trade from anywhere and anytime.
How to Find the Best Trading Platform?
For doing social trading, you are required to register yourself with a trusted broker. But finding a reliable broker is not easy as there are so many options to choose from. Here are a few factors that you can consider.
- Always check the regulation and security of the broker.
- Check whether the traders who are offering trading strategies are transparent about their details or not.
- Examine the number and quality of traders to copy.
Different Kinds of Social Trading
Social trading is of various types, and they are different from each other. Also, they have their limitation and benefits.
Top social trading types and styles are:
Signals or Tips
Signals or tips are one of the easiest social trading styles that new traders can use. The recommendations come from reliable sources like broker’s sites or computer-generated systems.
One thing that you must know about signals or tips is that you can’t interact with trade leaders. That means if there is any confusion, you need to solve it yourself. But with this trading style, you can get a better understanding of the market.
Forums and Profiles
Forums and profiles are two different things and are the first choice of traders who are serious about social trading. Through forums, you can get in touch with other traders, and profiles help you know about the traders in a better way.
If the broker you are trading with is legitimate, it will profile complete details of the trader regarding their trading styles, biological information, and other essential data.
If forums are reliable, they will have multiple active users in the discussion room. Also, good forums let the trader choose a thread that they want to join – like tools, strategy, tips, and forecast.
Out of all the social trading styles, copy trade is widely used and is equally popular. Copy trading is what it sounds like. Here traders copy the moves and trading strategies of other traders.
Copy trading is one of the best social tradings as it’s simple to understand and easy to execute. Moreover, the risk of losing money by following copy trading is also less.
How Does Copy Trading Works?
To execute copy trading, you should choose a trader whose methods you want to copy. When choosing a trader, you must stay mindful as a simple mistake might make you lose a vast amount of money.
Also, blindly copying the strategies might not work in your favor. You can also reduce the trading risk by not depending on a single trader or asset. When you have more than one option, you have an idea of what must be done if things go wrong.
Who Should Use Copy Trading?
If you want to increase your profitability by using copy trade, make sure you are one of the following traders.
Traders who want to Follow
Traders entering the binary options market with a single aim to follow other traders can use a copy trading strategy.
This set of traders generally don’t have much idea about trading options and are not planning to trade long-term.
Professional traders established elsewhere geographically or not familiar with a particular asset can use copy trading. It helps them take risks and try their luck differently without losing a tremendous amount of money.
The last group of traders is the one who knows nothing about the market, but they are serious about trading. They can use copy trading to learn from the masters.
Once they have learned the essential trading strategies, they can analyze the market independently for long-term trades.
Benefits of Social Trading
Here are some of the benefits of social trading that will help you understand whether you should use it or not.
Access to Reliable Trading Information
It’s important to speculate the market to win a trade correctly. But predicting the market and getting reliable trading information is not easy. That’s where social trading comes in handy.
With social trading on your side, you don’t have to worry about finding authentic trading information because you can quickly get the data in one click. Not just this, but social trading also makes it possible for traders to interact with experts to know more about options trading.
Quickly Understanding the Trading Market
Though you can become a professional trader, it requires a lot of time, dedication, and patience. However, you can fast-forward the process with the help of social trading.
You can get access to trading data, market information and can learn from seasoned traders to quickly become a professional investor.
Earning while Learning
Social trading is no less than a blessing for new traders as it allows them to earn while they learn. Even if you are trading for a while, you can learn from the trading strategies of expert traders.
This way, your understanding of options trading will become strong, and you will not have to get all the information for starting a trade.
Create Trading Community
Social trading is an excellent way of creating a community where traders can get in touch with trading professionals. Through this group, one can get important trading information, tips, and trading strategies for different assets.
Drawbacks of Social Trading
Just as social trading has certain benefits, it also has some limitations. Here are a few of them.
Different traders publish different information, which is helpful. But sometimes, this information is also misleading. And since people blindly follow the strategies and copy them, misleading information makes them lose money.
Similarly, traders who do not spend much time in the trading forums do not know about the authenticity of certain professionals. Thus, they take advice from them and regret it later.
Besides filtering the misleading information, you should remember never to give your credentials to someone else to trade on your behalf.
If you follow social trading, it can be a minor distraction. That’s because if you are well-informed about a particular thing and you find different information on the forum, you can get distracted.
Additionally, if you spend more time on social trading platforms, there are chances that you might miss some information that happens in the real-time trading market.
To sum up, social trading platforms are an excellent way of getting a better understanding of the market in no time. However, this can also be a little risky. That’s why you should always check the authenticity of the trader before following any of their strategies.
A social trading platform is for both- beginners and professionals, and it can benefit them. But for this, it’s essential to choose a reliable broker. Thus, you can either select one of the brokers mentioned above or follow the tips to find a different broker.