Social Trading – Fad or Phenomenon?

Community Trading has been around for several years now, with well known system ZuluTrade being set up back in 2006. Although it is merely more just lately that is has began to take off in a major way. Intended for example ZuluTrade now facilitates a total of sixty five different brokerages and is continuing to grow into a huge company.

Social trading allows investors to see what positions other traders are beginning instantly and either personally follow these positions or follow all the trading on this particular trader. The primary idea behind cultural trading really is easy, it allows individuals to piggyback on the results of successful traders allowing them to make considerable amounts of profit. Subsequently the adopted traders themselves make important commissions for each and every person who decides to follow their trades. Giving successful investors a reason to reveal their successful techniques and strategies with the larger Forex community.

This type of trading takes a lot of the difficult judgements out of the trading process which is partly why it is forced so heavily by agents. As it attracts an entire new breed of investors who don’t have an in-depth comprehension of the financial markets but do realize that there is much money to be made from day trading etc. Nevertheless social trading isn’t without its risks. A amount of traders embark on high risk trading strategies in the hopes of creating substantial commissions from followers, often these systems amplify departing lots of their enthusiasts with huge losses. These types of trading sites have countered this problem with a number of different methods, eToro for example allows some to assign no greater than 20% of their total capital to following one individual trader. Even these kind of measures still leave traders facing considerable risks.

This particular industry has flourished and will continue to flourish simply because many people will be attracted to the probability of producing substantial returns on their capital from simply following the trading activities of others. However the important risks involved with such trading are often vastly understated. Stepping into cultural trading can be done for very little with some social trading agents requiring deposits of no more than $50. Whilst I think there have recently been a number of major success stories when it comes to social trading, I am willing to be there have recently been an identical number of significant losses. Before getting included individuals should take a lengthy hard think about whether this activity is well suited for them.

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