Want to start trading Forex, but have no time? Try Social Trading

Trading of forex and other assets was never really meant to be a one-man show. If you examine a typical institutional trading setup, you will notice that there are no individual traders. Rather, trading is done in teams. Each team is made up of traders at various levels, with each senior level providing oversight, mentoring and direction to the junior members of the team.

That is why it is hardly surprising that institutional trading firms achieve the outstanding profits they achieve. But then you look at the individual traders and see that most do not end up profitable. One of the simple reasons is that individual traders go solo. There are no senior pairs of eyes to oversee the trade process. Without direction, mentoring and oversight, mistakes are made and this translates into poor trade outcomes.

This is why forex social trading is really one of the best things to have been introduced into the retail segment of the FX market. Now individual traders do not need to trade solo. They can work in teams and can copy trades from more experienced traders.

What is Forex Social Trading?

Forex social trading is a system where inexperienced traders can join a network where experienced traders provide trade signals. These signals can then be copied by the inexperienced or newbie trader, usually on an automated basis.

Usually, a forex brokerage or a third party provider will setup a trading platform that brings the signal providers and the followers together. Signal providers are compensated from fees paid by the followers of their signals. So it is a win-win situation for everyone. Providers get paid for their service, the newbie followers get potentially profitable signals, and the brokers get a portion of fees paid as well. This is how the social trading platform is organized.

Choosing the Right Social Trading Platform

The process sounds very easy in theory, but in practice, this is not the case. There are things that must be in place for a newbie trader to be able to select the right signals provider. FX-List provides a curated list of forex brokers that provide social trading services. But this section will touch briefly on what to look out for when choosing a social trading forex broker.

1. Ability to Select Multiple Providers

Choose a platform that enables you to select multiple providers. Just as you do not want to put all your eggs into one basket, so you should also try to spread your risk by choosing 2 or 3 providers for your signals.

2. Performance Analytics

Choose a forex social signals broker that features key analytics that will help you choose only the most appropriate brokers. The best analytics used in selecting signals providers are:

  • Risk Score: The risk score measures the risk management setting of the provider’s system. As a follower (especially if you are a newbie without much capital), you should choose providers whose risk scores do not exceed 4/10. Higher risk scores mean that the strategy employs more risk than your account can handle. This comes in very handy if there is a losing run that forms a sandwich in between profitable runs.
  • Profit Graph: Profit graphs that show spikes and steep drops indicate use of excessive risk. Use providers whose profit graphs show a gradual rise in the chart gradient. 
  • Profit per time: You would definitely want to use a provider that has shown profit consistency over a long time. Flash-in-the-pan performances will not cut it. So your social trading broker should be able to display historical performance charts for each provider.

You will see these metrics displayed in the forex social trading brokers featured on FX-List. Do some diligence checks before you pick any one of them for your social trading.

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