Over the past decade, most significantly over the past couple of years, there has been amazing amount of growth in social trading. But of course, why wouldn’t it? It really is an impressive tool. When a trader solely uses social trading for their trading transactions, the profits they have are three hundred and eleven percent higher than those who do not. Traders who keep a pulse on the market find social trading to be a great tool, they are able to analyze the activities of other traders the same way they would analyze forecasts, charts and news reports. For those just beginning in the world of trading, social trading can really help them to design a strategy which incorporates observing masters who have been successful with trade, learning as much as they can from from then and, even considering following in their footsteps
As there continues to be improvement in the Forex trading industry and social trading continues to prosper it has become more and more important for traders who are pushing worldwide entities to adapt and regulate their legal framework to include social trading to be transparent. The reigns on copy trading have been tightened by several European regulators, this has effectively overhauled the landscape of social trading.
How do trader benefit from a regulation-compliance social trading community?
Risk and Exposure Are Limited
Social trading operators are required by regulating entities to limit the risk and exposure of a trader by setting Stop Loss Levels which are appropriate and having the investments between social and traditional trading diversified, appropriate amounts of investment are allocated per master. A trader is categorized by their level of risk aversion, this will be determined through a questionnaire that covers the trader’s risk perception as well as their financial stability.
Through the matrixes of of advanced masters, masters and trader that best match up in trading approaches will be placed together. As certain risk thresholds are approached or if any activities that may present a higher risk than what they have been advised are about to be performed, traders will receive warnings.
Brokers are required, due to regulation purposes to have on site managers that will be able to help traders better manage their risk in order to prevent fraud, this way traders are protected on a higher level.
Social trading is advancing in more ways than just having a community that is socially regulated. The demand which is being generated by brokers and traders for tools that are more sophisticated is being kept up with by platform providers. Social trading manager for tech provider Leverate, Gadi Rosenfeld stated that many of the features which traders will be able to take advantage of are:
The robust platforms that are cross-community, which means that trader are not still confined to a single community of traders, instead they belong to a more larger community made up of traders from a variety of brokerages, that is a must for a trading experience that is engaging and interactive, stated Rosenfeld.
Social tools which are less non-textual, for example being able to “like a trade or a master, share analysis which are technical or be able to recommend a certain position to a friend.
They will also be investment hubs in the social trading platforms. They will be able to integrate portfolio managers, MAMs, robots, hedge funds and much more, into a network that will provide a more varied amount of choices for the traders.