What is Social Trading and Is it Right for You?

social tradingThere’s a movement sweeping the investment space; and it’s becoming more popular with every passing minute. It’s called social trading. However, because the concept is very new, chances are that you’re not quite sure what it is, the pros and cons, or whether or not you should take advantage of the concept.

Social trading is a new trading strategy that was brought about by the popularity of social media. The reality is that consumers have been sharing just about every part of their lives through social media for quite some time now; and in the investing world, sharing could become a strategy. So, innovative members of the investing community decided to make social trading platforms like copyop, etoro, and StockTwits that were designed around the world of investing. This way, traders can share what they’re doing; ultimately giving other traders a way to see what successful traders are doing and the overall opinions of traders in the market. As a result, the increased insight helps traders to avoid the tedious research involved in finding and capitalizing off of trends.

Social Trading Pros & Cons

As with anything else in life, there are positive and negative aspects associated with social trading. Here are the pros and cons…

Social Trading Pros

  • Less Time Researching – First and foremost, because social traders share what they are doing, finding trends becomes much easier. All traders need to do is look into social trading platforms to see what other, successful traders are talking about. Ultimately, this gives them more time to trade.
  • Share Your Skills – As human beings, we are social creatures. This means that we like sharing our experiences with others; ultimately helping them to make better decisions in every sense, including investing. Social trading gives successful traders a way to share their experience with others.
  • Reduce The Learning Curve – There is a learning curve associated with just about everything we do. There is no exception with regard to trading. However, because beginners have the unique ability to learn from the pros in the social environment, social trading reduces the learning curve associated with trading.

Social Trading Cons

  • Insinuates That Research Is Not Necessary – While there is only one negative aspect associated with social trading, it’s a big one. Because it’s easy to find trends and capitalize off of them by following others, many beginners forget to learn how to do their own research. The reality is that following others could lead to gains and could lead to losses. Therefore, it’s important to do your own research regardless of how you decide to trade. Unfortunately, the basic idea of social trading insinuates that research is not necessary when in all reality, it’s very necessary.

Is Social Trading A Good Idea?

All in all social trading can be a very profitable endeavor; especially if you are new to trading. However, if you do decide to take advantage of social trading, it’s important to remember not to take what other traders say to be fact. The reality is that no one can tell the future, therefore, no one will be able to give correct predictions 100% of the time. With that said, social trading is great, but remember to always do your own research in order to back up what you find in the social space.

 

Join our newsletter

If you like Critical Financial, subscribe and get our latest content via email.

Powered by ConvertKit

Share this post:

Leave a Comment

*