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The following guest post is courtesy of eToro, a leading social trading and investment network.
Social trading is looking more and more like the future of online trading and investment. It is definitely transforming the way that millions of ordinary people are managing their money and investing for the future. Investors are attracted by the openness and transparency of social trading and the ability to talk to other traders and copy their investments.
But there are no magic solutions for making successful investments and high returns. While social trading offers some strong advantages and potentially big opportunities, traders still have to analyse the markets and find the strategies that suit their budgets and financial goals. We’ll look at some of the ways to get the very most out of social trading, using the leading broker and social trading pioneer eToro.
Learn to use the social trading platform
eToro’s social trading platform contains all the tools that traders need to work towards professional level trading. Taking the time to thoroughly explore the platform and all its unique features is the foundation of becoming an effective social trader.
Start Social Trading Online
The starting point for all social trading is connecting to others. There are over 5,000,000 registered traders at eToro, but fortunately the People search tool allows you to filter traders by country, markets, profitability and time periods. You can adjust your searches to identify a pool of people who interest you. eToro has hundreds of Popular Investors amongst its traders and you can set your account to automatically copy all their trades.
Unlike old fashioned trading, the process of analysis begins with the People search. Every social trader and Popular Investor has a personal profile with a News Feed, Portfolio and Stats. Their News Feed shows comments and discussions with other traders and gives you a good idea of how well a trader engages with the wider community. The Portfolio shows all the Popular Investors open trades and their Stats give a clear breakdown of their trading activity and average risk levels. Use all these resources to build up a clear picture of who you think has potential and don’t be afraid to ask them questions.
Time spent on finding the right people to copy can save a lot of money later. You should select the people you copy as carefully as you would select an asset to trade!
Diversify your Personal Portfolio
Most traders recommend diversifying your personal portfolio. If you focus on a single market or asset there is a danger of losing your entire investment if the markets perform badly. Even investors who are drawn to high risk/high return trades usually balance their portfolios with lower risk/lower return assets like bonds, ETFs and more stable stocks. You can search Popular Investors by markets and consider copying people who specialise in a range of different investments. It’s also a good opportunity to improve your financial knowledge.
Copy Stop Loss Tool
eToro’s copy stop loss tool allows you to set an automatic stop loss on your copy trades. It means that if Popular Investors who you are copying start to lose more money than you can afford, your account will stop copying them. By setting the copy stop loss tool you can let copy trades run without the need to continually monitor them.
Build your Personal Profile
One of the best ways to make social trading work is to be sociable and build your own personal profile at eToro. Talk to people, ask questions and leave comments and feedback on News Feeds. Be friendly and polite and you’ll probably get a very positive reaction. As your trading skills develop you may find people coming to you to ask advice or discuss trading strategies and financial events. This is your first big step towards becoming a Popular Investor and earning a second income when other traders copy you.
This post is not investment advice. CFD trading bears risk to your capital.
Past performance is not an indication of future results.