Social TradingNov 5, 2019
What is it
A social trading is a platform, in this context a social network, for exchange traders. It is a place where traders communicate; exchange information; and trade on the stocks, derivatives, foreign exchange, and cryptocurrency markets. The main feature of social trading is copy-trading, otherwise known as mirror trading: a service that allows for the copying of transactions.
History of social trading
Social trading is a modern version of the historical communication that would happen between traders. Imagine a scene in the late 1980s; in some New York City bar. After a busy day, traders discuss successful transactions, the market situation, share strategies, theories, and forecasts. This informal exchange of experience leads exchange players to copy overheard strategies or even act together. So, this was the forerunner to the phenomenon that we today call “social trading.”
Over the past 30-40 years, a significant part of this trading communication has migrated to digital channels. Information exchange now happens in forums, chat rooms, by email etc.
The first social networks for traders (eToro, Zulutrade, FUMGO) appeared in the 2000s during the social network boom; think Facebook, YouTube etc. As a result, beginners and experienced traders met together on such platforms, where their mutual cooperation helped all members of the community.
Copy trading and how it works
Mirror trading, or copy-trading, is based on the idea of the automatic copying of other traders’ transactions. This means that your portfolio is connected with the portfolio of traders whom you “follow”. You activate the copy tool and all that trader’s transactions are copied into your portfolio. This is much easier than analyzing, sorting information, and making decisions yourself. In addition, it significantly reduces your risks and your stress level.
You are free to choose the trader to copy, and each platform has its own settings and filters which helps you to choose a trader. The following options are available on the FUMGO social trading platform:
- Number of followers. It shows how popular the trader is and how many people trust them to copy their trading strategies.
- Average profit per order. The average yield per trade.
- Accuracy indicator. The average accuracy indicator of the trader’s strategies and forecasts.
- The number of open transactions. More open orders means show how active this trader is in the market.
- Closed deals. More successfully closed transactions signify how successful the trader is.
- Trader’s profit for the year. Trader’s profit on the platform as a percentage, over the past year.
- Rating. The total indicator of the trader’s success, which include the previous 6 points (subscribers, accuracy, profit, etc.)
- Risk level. How often this trader use risky (but more potentially more profitable) strategies.
You assign a % of your deposit by choosing a trader, and it will be used when copying the transaction. For example, for every $10,000 that Trader A invests in Asset X, you can invest your $1,000. When the trader makes his choice, your position will be closed and you’ll get the same relative profit.
Social trading advantages
Social trading platforms combine the advantages of different communication channels and synergise their effectiveness. Let’s take a quick look at them:
- Availability. Social trading has evolved well since its invention. Anyone with even small starting capital can successfully enter the game.
- Training format for trading. Social trading allows you to follow the actions of experienced traders, and learn during the process of observation. This is the best way to earn money right in the learning process; simply copying successful transactions. New traders have the opportunity to observe what other traders are doing, but also to make such transactions themselves. Social trading is 2 things in 1: both learning and earning at the same time.
- Demo accounts. Some platforms, including FUMGO, allow you to trade and copy transactions using a demo account, which makes it possible to train without taking risk.
- No emotion trading. A social trading terminal provides you access to a large amount of information from experienced traders all around the world. This increases your trading confidence and helps you to make decisions confidently.
- Diversified portfolio. Social trading involves both access to a large amount of information and the possibility to diversify your portfolio and your risks. Traders are ranked according to various criteria. It gives other users a certain degree of security, since they can evaluate the trader before begin to copy their transactions.
- Ease of use. Good social trading networks try to create intuitive interfaces – easy to use and convenient for beginners. This makes the copying process simple and less time-consuming.
- Extra income for traders. If you are an experienced, successful trader, you can receive additional income by connecting to social networks and proposing your transactions to subscribers for copying.
- Collective knowledge. One of the main advantages of social trading is collective knowledge. A newcomer on such a platform can easily get information from several sources at once.
- Non-custodial. Non-custodial describes platforms that don’t store users’ money inside their own system. The FUMGO terminal doesn’t require any deposits or withdrawals from your wallet, but you trade directly through it instead. Your money is stored in your chosen exchange account and the terminal can’t withdraw it. Access to your savings is available only to you, and it isn’t entrusted to a third party, as in the case with other common social trading platforms.
How to become an experienced trader without taking risk
Both pro traders and their followers earn on the copied transactions’ and on the successfully completed transactions. Traders take risks when creating transactions and are interested in their effectiveness. As a result, you are dealing with real people in real time, not like in cases with anonymous platforms or channels with signals. Most social trading networks, including FUMGO, have subscriber ratings. All of this allows you to plunge into trading, not being an expert, and learn “in the field”. In this case, you will have the opportunity to earn real money, not a sad experience.
How to start on the FUMGO social platform
So, you can start trading on a social platform right now. To start copying transactions on FUMGO, you need to perform only 3 actions:
- Sign up and add an exchange account.
- Choose a trader. You need to filter out available traders by profitability and other indicators, such as percentage of successful transactions, drawdown, number of subscribers received, and investment return. Calculate the profit you would receive by following the selected traders over your preferred time period.
- Set limits to start. Choose your budget (maximum and minimum amounts for one transaction) for copying deals of each trader you like. After completing the following steps, you can activate copying deals.
Now, relax and monitor the progress of your account from time to time. Study the processes while they work for you and gain experience. Note, you can add new traders or stop copying individual traders and replace them whenever you want it.