When starting out in the forex trading world, everyone wants to know which social trading platform to join. The answer to this question ultimately depends on what you are looking for. For instance, some investors want advanced risk management or detailed research features. Others are looking to network with other traders or a platform that facilitates a hands-off approach.
Whatever the case, there are plenty of social trading platforms available online these days. You will be spoilt for choice. While this may be great for you, it can also complicate the decision-making process. This is especially true if you don’t know which factors to consider when making your choice.
That said, here are 4 tips that will help you find the best social trading platform in 2018:
The main characteristic of any social trading platform is that it allows you to benefit from the experience and technical know-how of other users. It, therefore, makes sense that the more users a platform has, the more beneficial it will be for you.
Studies also show that networks which offer a wide range of trading styles and techniques provide a greater opportunity for all members to create their own balanced and profitable trading profitable. So, before choosing a social trading platform, ensure that it has enough users to help you meet your goals.
On the other hand, smaller networks tend to suffer from copy trading bubbles. This means that most of its traders copy the same handful of experienced brokers. In the end, this proves to be a serious disadvantage since there is no way for you to hedge your bets in case the veterans go bust.
Furthermore, larger networks also tend to fall under greater scrutiny. This means that you can be sure it is not susceptible to any shady practices or trade manipulation.
When choosing a social trading platform, it’s important to consider the range of assets offered for trade. This is a crucial factor because it will affect the level of diversification that traders and investors can achieve.
And – most importantly – it could have a significant impact on your earning potential. After all, a wide variety of tradable assets creates greater opportunities for you to make a profit from.
Different platforms offer varying commission structures for their copied traders (or popular investors). This could be on a per-trade basis or via a variable monthly membership fee. Basically, every time someone copies one of their trades, these veteran traders earn a specific commission.
Now, how could this affect you? As a trader or investor, you should keep in mind that the commission a platform offers its top investors could affect how they manage their portfolio. Again, this could mean the difference between profit and loss in your own trades.
It’s also a good idea to know that social platforms generally charge more commission on trades than the typical retail broker. While the difference is not much and social platforms present greater benefits, you will have to decide if the cost is worth it. Also, take time to compare the spreads and commissions of different platforms before picking the best one.
However, the most important factor to consider when choosing a social trading platform is transparency. Various networks differ on the amount of information they give about the traders on their network. Although the whole premise of social networks is to make trading information available to other people, some platforms share more data or in more transparent ways.
For example, you will rarely see these platforms displaying a user’s entire trading history. It’s more likely that you will see the opening and closing positions on your feed. But you won’t be able to circle back and view a record of closed positions for each trader.
Instead, such data is usually presented as agglomerated statistics, charts, and graphs. This is where it can get very tricky, with some platforms presenting this data in misleading ways.
Social trading is the next frontier in the forex world. While it has come with a lot of conveniences, it is important to take time and choose the best social trading platform for your needs in order to experience its full benefits.