What is Social Trading? - Advantages and disadvantages of Social Trading

What is Social Trading? - Advantages and disadvantages of Social Trading

June 18, 2021
1 year ago

What is Social Trading?

We live in the digital age, and within it, social networks are very commonly used. In the trading environment they also have their effect, although not in the same sense, but with a strong community character. In this article we will discover what social trading is and everything you need to know about it.

Social trading is nothing more than a community of traders who share their experiences, motivations, analysis and operations. It is made up of both beginners, who look for other traders in this type of community to support and learn from, and leaders, those whose trades are replicated.

What is Social Trading? The term "social trading "* can be used to describe the activities that an expert trader performs through social networks such as Facebook and Twitter, but in a broker specialising in it such as: Naga. These markets have a reputation for low transaction costs, are easy to use and have a large community of users who help each other. As a result, Social Traders have a strong affinity for trading on these platforms. As Social Trading has grown in popularity, some trading platforms have started to offer more advanced features and tools to help their users engage with fellow Social Traders and interact with a large community of traders. Other trading platforms have incorporated features that allow users to buy and sell through social trading.

Difference between social trading and traditional trading

Social trading allows you to take actions in which the opinions of other people carry a lot of specific weight. Traditional trading consists of what you have probably been doing all your life, trading on your own. To tell the truth, there are profiles of traders who are better at solo or traditional trading than social trading, although it is true that it is not possible to say that one or the other way of trading is more advisable or prevails over the other.

The most important thing is to feel comfortable, although it is true that social trading is ideal for people who do not have much experience. Thanks to this type of communities, you can acquire knowledge and be aware of good operations to carry out.

Alternating between the two systems is not a bad option either, so you can move back and forth between the two to get the best experience. In fact, it's a very convenient idea to do.

Where to do social trading

While there are a lot of proposals for social trading, one of the most interesting is the one that is offering us this that we tell you below. Naga is a community where you can do social trading, regardless of your level of experience. More than 1 million users make up this community, which allows clients to share and copy strategies on more than a thousand assets.

Can I do social trading with cryptocurrencies?

Yes, there is no reason not to. Cryptocurrencies are one of the most popular assets, although for some groups they are not well regarded due to their volatility. But for that very reason, social trading can be a great help for those who start with them, so they have the opportunity to know the opinion of more authoritative voices.

What is the difference between social trading and traditional trading? In traditional trading you own your buying and selling decisions. Normally you would sit in front of your computer, look at the charts, make your predictions and make your investment. In this way you completely assume all the work and all the hours it takes to perform this exercise. In Social Trading you decide how much you want to invest, following the steps set by another more experienced trader. This means that you do not trade blindly, and that you trade with the certainty that you are making a good decision.

The success of a trader you can copy is determined by their level of profitability. The higher his percentage, the smaller his losses and the better the profits he makes from his trades. Don't see social trading as a fast and 100% safe way to make money because... fast it is, but the safety of your investment depends on the skill of others.

Advantages of social trading

Next, let's discover all the positive factors of social trading and why it is interesting for you to do it.

Earning extra money by sharing your trades

This option is ideal for experienced traders who have already mastered what they do. If this is your case, this information is of interest to you. Getting into social trading will allow you to share all your trades, and if the results are good, you will gain followers. This will lead you to perceive some extra benefits that you would not earn if you practice traditional trading.

More free time

The main advantage of social trading is that it saves us a lot of time. By replicating the trades of those who have more experience than us, we do not have to spend time analysing charts and trades. Obviously, it also has some risk, but it can be an option to minimise them.

Diversify your portfolio with unknown assets

We always remember the importance of specialising in specific values. The proverb is very wise, "he who grasps too much grasps too little". In the case of social trading, you can get in touch with experienced investors in securities or assets that you do not know. Therefore, you are increasing your chances of making money and becoming interested in those particular assets.

Contras of social trading

Obviously, not all are advantages, social trading also has a number of disadvantages that we must weigh.

You have to calculate your level of profitability.

Practising social trading if you are replicating the actions of another has an economic cost. This is something that must be assessed at all times. In addition, there are people for whom social trading is a high level of stress, as having a whole community behind you is not an easy thing to handle. Finding the balance between comfort and profitability is what makes this practice profitable.

Watching the market

Social trading can make us lose a little vision for the market, as we are delegating our own trading to more experienced people. This applies to beginners, but if you are a person who practices social trading for others, i.e. they replicate your movements, you have to be very vigilant. It is not the same to make a mistake that only affects your portfolio as it is to your legion of followers. An experienced social trader has a lot of weight on his back.

If you only do social trading, you don't learn how to trade.

Perhaps we should say that learning is slowed down, as you are not working hard in front of the screen analysing data and charts as intensely. Social trading is good, but you are delegating a task to others that you should be doing if you want to become an experienced trader. Therefore, social trading can lead to the risk that our learning curve is slower, or even non-existent.

Therefore, social trading is one more tool at your disposal that allows you to trade in a more relaxed way. If you already have experience and others are following you, a good way to get some additional benefits.

**It should be noted that not everyone is able to practice traditional trading, as it puts a lot of pressure on you. Therefore, and as we always recommend, the balance between these two scenarios can be a very interesting way out for you to consider.

Social Trading is a way of trading in which the trader can learn from the experience of others and trade on the same platform as them. If you are interested in trying this method, we suggest you visit Naga which offers you a DEMO account with €10,000 so you can test trades.

We hope we have helped you once again. Canal Trader.



Learn about Social Trading

Social Trading is a new system that gives everyone access to the world's best traders. You can follow top traders and automatically copy their trades. You make money when they make money with no trading expertise required. This is the Social Trading revolution.