In simple terms, social trading is a form of investment or trading where traders observe the trading pattern or behavior of experts and other traders with the free-will to replicate the observed strategies in their investment. This has nothing to do with handing over investment funds into the hand of a third party. Social trading allows peers to share trading strategies among themselves. This means investors or traders with little knowledge of fundamental and technical analysis in trading have nothing to worry about.
How to Use Social Trading in Cryptocurrency
Social trading network is just like any other social media platform. The only difference is the area of interest. Social media focuses on the social aspect of individuals while social trading deals with the trading portfolio of individuals. Users have choices to access the profile of traders, view their portfolio and access their trading history. Also, social trading makes it possible to follow traders or investors who have made progress in trading and may want to learn from them. Some traders or experts have a good communication with their communities whiles others take time to update the community. It’s advisable to follow cryptocurrency traders who answer questions and help traders to grow.
Social trading has two important ways of benefitting the average tradernamely:
Copy trading: In copy trading, the average trader copy the exact trading behavior or strategy of another or experienced trader. What happens is that traders gets a direct opening of all current and future operations of the traders they follow in the network. When a trader opens a trade with $10,000, and you decide to follow him with $1000, all future trade openings of the trader will lead to a set up of another opening in your account with a portfolio of 10% of any amount traded by the followed trader. In this context, you win when the trader wins, and vice verse. In copy trading, you indirectly invest in the person instead of the cryptocurrency. His progress absolutely means your progress, and when he undergoes a losing streak, the same happens to your investment. Traders can also copy the entire transaction of traders including the trade entry and take-profit.
Mirror trading: The average trader launches an automatic execution of the entire trading strategy of another trader. In other words, it is the automatic copying of the execution of several auto-trading and signal services.
Social trading enables newbies to learn fast as there is the opportunity to message traders and ask for clarifications when they make a confusing movement.
Getting Started – Popular cryptocurrency trading networks
Getting started with cryptocurrency social trading network, first, select a social trading platform, and there is a tall list of them including eToro and ZuluTrade. eToro is arguably the leading cryptocurrency social trading network with a wide range of cryptocurrency options such as Bitcoin Cash, Ethereum, XRP, Cardano, etc.
After selecting the platform, analyze the available traders and choose the most consistent and successful one. This is very important because the success and the failure of your trades solely depend on the trading decisions of the followed trader.
The next thing to do is to allocate the amount you wish to trade with across the selected traders. It is worth noting that the bigger the amount, the bigger the reward and vice versa. However, expectations of getting rich overnight with this venture should be limited.
After allocating the amount, sit back and watch the outcome of the operation. Be monitoring the account to check the progress.
Most social trading platforms also give room to learning from traders who share investment strategies and update the community with daily news surrounding the niche, instead of just copying trades and focusing on money.