Starting to invest can be a challenge for many, especially when it comes to trading practices. If you are a beginner in the area and want to make good choices, Social Trading may be the best strategy to stay aware of market trends and opportunities.
This method is aimed at all types of investor profiles and focuses on beginners and those who want to build a portfolio with the best recommendations. Check the text below and learn how Social Trading works and see tips to benefit from this practice.
What is Social Trading?
Social Trading is an analysis method that is based on the experience of large investors to establish winning strategies in the market. It is a process generally recommended for beginners, but which can be followed by any enthusiast or investor.
This trade methodology consists of creating an investment portfolio based on the recommendations of specialists and managers, leaving the responsibility for choices in the hands of people who are more advanced in the area.
The practice gained space in the market as interest in the Stock Exchange and the crypto market grew among the population. Several specialists appeared to give investment tips and build portfolios based on recommendations.
Social Trading vs Copy Trading
It is common for comparisons to arise between Social Trading and Copy Trading – in fact, many investors think they are the same thing. However, they are different trading strategies.
In fact, Social Trading encompasses a part of the Copy Trading concept, but it is a strategy all in one. Copy Trading, on the other hand, is nothing more than a negotiation made by an investor based on the recommendation of an expert (one copy, only).
How Social Trading works
Social Trading encourages group investment patterns, that is, several investors come together to make equal contributions and operate together in the market. The strategy is usually put into practice through specific platforms — eToro, for example, is the best example of this segment.
By bringing together diverse investors in an exclusive forum, decisions are taken together to establish an organized and aligned trade. Users share information and analysis to together define the best cryptocurrencies on the market.
Main features of Social Trading
Social Trading has its own characteristics, especially on how to choose cryptocurrencies and when to act in the market. There are 4 basic pillars that every trader is based on to invest based on this practice:
- Flow of information : there is a free flow of information between users of Social Trading platforms, allowing any individual to have access to recommendations and to participate in decisions;
- Cooperative negotiation : market negotiations are done collectively, contributing to organized decisions;
- Monetization : its objective is to make all participants win, so the monetization at the end of the strategy is always shared in advance and clearly;
- Transparency : Social Trading platforms share real-time information about strategies such as charts, analysis and polls. Earnings expectations are also disclosed frequently, giving greater credibility to decisions.
What trades can I make on the platform?
Trading on Social Trading platforms takes place on a standard basis, allowing traders to better organize themselves during the flow of activities. If you want to join one of these tools, you need to be aware of the rules of each network, but it is quite likely that you will be introduced to the already consolidated forms of trade.
In single trading, for example, the novice trader can base his choice on the recommendation of a more experienced trader, individually. In Copy Trading, the investor follows the same path as a manager.
Portfolio copying is another alternative for those who want to use Social Trading. In this methodology, the trader copies the entire portfolio of a recommender. Finally, mirror trading consists of automating executions.
What are the advantages of Social Trading?
Social Trading offers several advantages for investors in the Stock Exchange or the cryptocurrency market, allowing choices to be made based on expert recommendations and in a more practical way. The main positive highlights are:
- Follow real-time recommendations for the best investments;
- Time savings – since major market analyzes are not required;
- Rely on the help of experienced traders during operations;
- Free access to platforms.
When we talk about the crypto market, Social Trading becomes an even more interesting strategy, since, with the expansion of this market – there are more than 21,000 types of cryptocurrencies available – investors can feel lost about which choice to make. The assistance of an experienced trader contributes to better choices and at the right time.
Social Trading Tips
Want to start investing in crypto but don’t have the necessary experience? Or, are you already inserted in this environment, but do you feel that you lack time to make better decisions about your investments? Then Social Trading can be the best solution to optimize your analytics.
You can choose to follow recommendations on your own or access dedicated platforms for this purpose — such as eToro. There are also exchanges that connect users and traders from all over the world in real time.
However, remember that trading practice is quite volatile and requires a good deal of patience. Crypto investments are designed for the long term and must follow an analysis based on price history, market expectations and other variables.
Now that you know what Social Trading is and its main features, it is easier to develop a safe investment strategy for the crypto market. Remember, however, to assess the reputation of the assets and draw up a strategy for earnings focused on the long term.