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#1 23-04-2019 16:07:15

johnedward
Admin & Trader
From: Paris - France
Registered: 21-12-2009
Posts: 2580
Website

Are traders on social platforms more profitable than other traders?

Are traders on social platforms more profitable than other traders?‏


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What's social trading all about?

Social - or mirror - trading refers to various new trading capabilities. These features consist of the ability to mirror and/or copy other traders' trades (including how they manage their money and position sizes).

The idea behind it is "the more, the better". Expert traders will rub off on newer and less-experienced traders. As with tutoring or mentoring, you'll learn how to paint portraits better with the help of others. 

Social trading was born from the concept that online investors will make better choices if they can communicate with or copy other successful traders. 

The most successful social trading platform is believed to be eToro. The company more recently went the social route as way to separate itself from competing brokers. Although the company started out as a typical broker, it has now added social trading to its overall trading offer. 

Intial findings suggest that traders on social trading platforms make a bit more money than others. As such, investing environments that improve profitability have an advantage over those offered by traditional forex brokers.

Why should forex brokerages provide social and mirror trade services?

Mirror trading currently is viewed as a means to make a broker more successful, as it encourages traders to trade more and makes it easier to learn the ropes. 

Such social platforms therefore favour customer acquisition and ensure that brokers keep these clients longer. One reason is that social traders seem to lose money on a slower basis and for those who win, they're even more profitable than they would otherwise be if they were trading on their own. There's also the viral effect; word of mouth helps attract other new social traders.

If you think this is a bit like MAM account trading, you're right. Once a profitable trader has been identified, mirror trading platforms are more easily able to attract new traders and therefore business.

Do social trading networks need to be regulated?

If you're a European trader, the answser is affirmative. 

Outside of Europe, things are much more fuzzy. A few regulatory agencies haven't really acknowledged these mirror trading platforms so no specific licences or permits are needed. As such, it's better to sign up with a social trading network that is overseen by a regulatory agency.

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