Individuals should use strategies spread by those who are directly accessible through the social trading platform itself, rather than those operating under pseudonymous identities.
With a global economic landscape that continues to evolve radically in recent years, one of the most important advances that have emerged in the world of financial investments is that of “social trading”. In its most basic sense, the concept is for investors to copy and execute the live trading/investing methodologies of other experienced traders.
Since the setup associated with social trading platforms is largely automated, they are ideal for people just getting their feet wet in the world of digital assets. Not only that, but these platforms can also be of great use to experienced traders as they come with a plethora of analytical tools, allowing them to gain insight into the currency trends that are cluttering the market, such as changes in expected short-term momentum and potential trend changes.
It is essential to distinguish between social trading and copy trading. In a nutshell, copy trading refers to the act of investors replicating the strategies of others without any personal interaction involved in the transaction. At the same time, social investing allows users to use the portfolio management of experienced experts and interact with them.
Cryptocurrencies and Social Trading Go Hand in Hand. Why?
In recent years, the idea of social trading has been gaining more and more adherents, especially among cryptocurrency enthusiasts. This is because, while most traditional investment techniques don’t translate well when used in the context of digital assets – due to issues such as strong price volatility – social trading is an exceptionally good fit for digital assets trading.
In addition, social trading is ideal for people with a low-risk appetite or for those traders who are just beginning the transition from the transaction economy to the cryptocurrency sector. This is because the technique offers users the ability to simply rely on the judgment of experienced experts who have a proven track record of posting solid profits without them having to learn every little aspect of how the cryptocurrency market works.
Key Aspects of Social Trading Platforms
Since most people take into account the past performance of the strategies they intend to apply, it is essential to use social trading platforms that offer portfolio management capable of providing sustainable income streams and not just short-term profits. It may also be wise to consider platforms that work on a successful fee-based model so that traders only make money when the investor does, or choose platforms that have been in business for longer periods with high AUM (assets under management).
Furthermore, it is vital to consider the risk aspect of the strategies being used. In this regard, the investor should evaluate his tolerance for risk before seeking the advice of certain investors known to take serious risks in the course of their daily trading activities. Thus, depending on one’s disposition, it is best to see whether an individual should take a short-term approach to make money or a relaxed long-term one.
Last but not least, individuals should use strategies spread by those who are directly accessible through the social trading platform itself (via their social media accounts, email addresses, etc.) rather than those people operating under pseudonymous identities. On the other hand, operators can start with little money and use those ecosystems that suit their interests, allowing them to start with as little as 1 dollar if necessary.
By Audy Castaneda