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Introduction to Social Trading – What is Social Trading all about?

Introduction to Social Trading – What is Social Trading all about?

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Social Trading aka Copy trading or Mirror trading is a unique investment strategy that allows a “follower” to copy or replicate a particular trade pattern of other traders. These traders are also known as Signal Providers(SP) or Lead Traders.

With Social Trading, you don’t need to monitor the markets regularly in order to place a trade  as this will be done by the signal providers.

The way Social trading works is simple: As the signal provider opens a trade in his/her account, the same trade is automatically opened and managed in your own account because you’ve subscribed to follow them.

This form of trading has proven to be very beneficial to most beginner traders who are yet to learn or unable to learn forex but still wants to participate in it.social trading

Apart from generating income for themselves, a professional signal provider is also compensated based on the amount of profitable trades made in his follower accounts.

You can also become an SP yourself after you’ve learnt about the markets and are able to teach others how the stuff works.

General Concepts and Frequently Asked Questions about Social Trading

Although there are various social trading platforms available, they all have a basic or general principle of operation.

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How does Social Trading work?

No matter the type of platform (e.g Zulutrade, Ayondo e.t.c), they have the same working pattern:

  • First, you register with the platform and open account with one of their preferred forex brokers.
  • You authorize the platform to send signals to your broker account
  • Choose a Signal Provider and allocate funds to them
  • Whenever the SP places a trade, the same trade opens up in your own account according to your risk and leverage settings.

 

How much will this cost me?

Most times, there are no costs required to join any of the social trading platforms. However, you pay a little commissions called spreads which usually involves both the platform and the broker.

The only start up cost required on your part is the usual broker account funding and nothing else.

Since several Copy trading platforms can operate differently, some may require you to pay an extra money for the service of selection of the best signal providers and associated risk management settings.  This is unnecessary because a follower can easily learn about how to select the best signal providers.

Is there any prior trading experience required?

You don’t need any previous trading experience if you simply want to follow and copy other traders. However, a basic forex knowledge is required for to fully understand how your account is being managed by the SP.

Most platforms allow you to practice with free money for some time before you start the real trading. Hence, exposing you to how it works.

How does Execution of Trades Occur?

Whenever your chosen SP places a trade in their own account, it will take probably one to two seconds(Slippage) before the same trade is placed in your own account. Due to this, the opening price of the trade in your SP’s account may not be the same as yours. Besides, spreads are added to yours.

During tight periods like news releases, it may take even longer time before the trade is executed within your own account and when it takes too much time, it may no longer be placed and your social trading account may even be disconnected from your broker account.

This is a rare scenario and barely happens. However, when it occurs, you can quickly contact the live support to fix the problem if you don’t know what to do.

 

Is there any Minimum Cost required for Joining?

As i said earlier, you only need to fund your broker account. This now depends on the selected brokerage firm. But in general, the lowest i have seen so far is $50 when using Nordfx broker with Zulutrade platform.

Can i use my previous account with a supported broker?

No, the social trading platform normally requires that you open a new account using their own unique link for them to properly link both accounts and as well be recognized as the IB.

How do i deposit/Withdraw my funds?

This depends on the broker of choice but in general most of them accept the ones that will suit you. They often offer deposit and withdrawals via Paypal, Webmoney, Skrill, Credit/Debit Cards(Mastercard, Visa, Amex e.t.c), Neteller, Western Union, MoneyGram e.t.c

How secure are my deposited funds?

Your funds are held within your broker account available for trading. Your are the only one who has access to your funds and can withdraw them at anytime within your broker account.

Your SP has no access whatsoever to either your funds, broker account or even your trading activities.

Which Countries are allowed to participate?

Traders from most Countries are allowed to participate in Social trading unless otherwise specified.

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