It is no secret that online trading is the biggest news that has hit the financial markets recently. Traditional forex traders are migrating to this relatively new type of trading instrument en masse, with an increasing interest to make online trades their forte. With this financial niche booming, brokers such as eToro are expanding and improving the services to boost their client base. (But wait, is eToro good for trading? If you’re not sure then you better read more information first about them by checking out Wikitoro which has tons of details about this broker.)
One innovative service enjoyed by investors is social trading that emulate or execute trades on their behalf. A good platform executes a trade only if there is the probability that it will end in-the-money based on technical data. The human element comes in with the trader setting the parameters (such as stop-loss and take profit) and other features tailored to cater to how an investor wants his trades to transpire. Once the copy trade is executed, positions will commence without further actions needed.
Advantages
Time. Commonly referred to as “copy trading”, they are part of standard Forex, stock and CFD trading. Although newly-used in these instruments, this method greatly reduce the amount of time that traders consume just to carry out technical analyses of data. This is an advantage for the number of traders who are yet to gain more experience in the correct interpretation of charts and graphs.
Security. Developers of social trading platforms go through great lengths to provide traders the needed security to make them safe for their clients. Since traders will put their trust to trade with their money, a high level of security is offered by trading platforms. There is no room for glitches and error that could cause them to trade differently than the parameters set by the trader.
No Extensive Knowledge Needed. A high-quality trading system necessitates familiarity with various techniques that can guarantee profits to an investor, such as candlestick interpretation and resistance points. An copy trading system makes it easier for newbie traders without having to spend considerable time monitoring market events all the time. In fact, these systems are much simpler and are greatly helpful in the management of financial accounts manually.
Presence. This allows traders to not be physically present when trading commences. Even on different times of the day, copy trading platforms are beneficial to investors who work on a busy schedule and can’t be present at all times.
Psychological Involvement. Traders who engage in multiple trading will not be stressed out as they can just set various indicators or timeframes as to when a trade will be carried out. This enables a more sound financial decision as there will be less stressful factors to consider.
Disadvantages
Losses are Possible. This cutting-edge feature does come with a cost if you copied the wrong trader. Although there’s a chance that you can make profits simply by emulating the positions made by a more experienced trader, keep in mind that they are still humans and are still capable of making the wrong decisions. Any trader most would want every cent’s worth and commonly demands a string of successful trades but remember that losses are still unavoidable.
Analysis. Constant use of copy trading can eventually lead to ignorance of techniques and strategies needed for trading. One such ability that traders should possess is fundamental analyses. Copied trades would not be cognizant when an important shift in economic events has taken place and will not be able to use this information in its trade execution unless the experienced trader that you are following has these much-needed skills.
