How to become successful with Social Trading
1. What is Social Trading?
Social trading is an alternative way for retail traders and investors to trade forex markets. This trading concept is based on an idea of following (or basically copying) other successful traders using a social trading platform. The idea is pretty simple: all trades on your local account are automatically managed by a remotely located (hopefully successful) trader.
2. What is a Social Trading Network?
A social trading network is a web based system that connects all successful traders (trading guru’s) with retail traders (the followers). Most of those platforms are focused on the social aspect of trading, allowing all following traders to comment, analyze and review the performances of all successful traders connected to given network. Doing so, users are fully in control w.r.t. the performance rating of each trader and they decide which trader is worth following.
3. What are the Best Social Trading Networks out here?
There are many social trading networks out here, however most of them are worthless and are specifically designed to put money into the signal provider and broker’s bank account. The reason for this is how the most trading platform work. Basically when a successful trader joins a social trading network, he (or she) wants to earn some money by sharing his trading signals. There are few mechanism of generating income from sharing profitable trades:
1. A successful trader get his cut (a fixed commission), from the partner broker which is “recommended” by each trade sharing platform, when new users are joining in.
2. A successful trader gets a part of increased “commission rates” that are paid by the users that are copying the trades on their accounts.
3. A successful trader gets a part of increased “spread rates” that are paid by the users that are copying the trades on their accounts.
The big problem is that point 2 and 3 will ruin your trading account. Even when a master account of the trader that is providing the signals is going up, due to increased commissions and spreads your account will only lose money! So it is very important to know the following: On most social trading platforms you will only lose your money!
So, what are the best trading platforms and how to prevent from being ripped off?
The answer is quite simple and later on I will explain you why. ALWAYS go for a platform that offers the possibility of copying remote trades using your local MT4 account! The best places you can go in that case are:
4. Can you make money using social trading networks? And how to optimize social trading?
Yes, when done right, it is possible to make money by following other traders from social networks. However you need to do it in a smart way. Here comes a little smart tick I’ve learned lately. The only way I know, to make money with social trading is by “cheating” the system, and here is how to do this. Basically you need two separate MT4 accounts:
1. MT4 account connected to a remote social network: this will be your master account that will copy every single trade from a selected successful trader. This account will most probably eventually lose some money due to larger spreads and commissions. So it should be very small < $500.
2. MT4 account connected to first MT4 master account: this account will copy trades from the master account (1). The big difference is that this will be your “normal” account with low spread (like ECN) and low commissions. This 2nd low spread account should be used to grow your capital using social signals.
Here is where a free tool called, FX Blue Personal Trade Copier comes to the rescue! This tool allows you to connect two local MT4 accounts with each other, for FREE. You can download a free user guide over here. I’ve also found a YouTube video which explains how to install personal trade copier: