Social Trading Definition
Let's start with a definition of Social trading. It is a service that allows investors to replicate the trades of experienced traders.
Social trading requires little or no knowledge of the financial markets, and only requires the user to make a correct selection of the traders to follow, especially considering the percentage of successful trades and the diversification of the financial instruments traded by the expert, namely that the expert does not focus on a single financial instrument or, failing that, does not replicate several operators who operate only with the same financial instrument.
It introduces a new way of analysing financial data by providing a ground for comparing and copying trades, techniques and strategies. Before the advent of trading socially, investors and traders relied on fundamental or technical analysis to formulate their investment decisions.
Using social investors and traders, investors could integrate social indicators of investment decision making from trading other traders' data feeds. These networks can be considered a sub-category of online social networks.
It allows traders to trade online with the help of others and some have asked to reduce the learning curve from novice to experienced traders. Traders can interact with others, watch others make trades, then duplicate their trades and learn what prompted the best performer to make a trade in the first place.
By copying trades, traders can learn which strategies work and which don't. The company is a speculative trading activity for short-term profits pursuit.
Social trading features
What are its characteristics? We can summarise them as follows:
Flow of information: It implies the free flow of information between individual financial investors Unlimited access to information is important in financial trading and this frees up the exchange of information of interest on a small scale and individual investors
Cooperative trading: It offers traders the opportunity to work together in trading teams that can trade markets collaboratively, whether by pooling funds, splitting research, or sharing information
Monetisation: As with social networks in a broad sense, monetisation strategies are not always clear. As with social networks in general, it is possible, however, that the long-term value of such websites may come from the variety and depth of data about their users that their active communities are likely to generate.
Transparency: Platforms reveal trader performance statistics, open and past positions and market sentiment, providing members with comprehensive information to assess the credibility of the contributors they follow on the platform.