Advantages of Social Trading Platforms
In the past ten years, online trading in markets like forex and binary options has grown rapidly. This is mainly due to easier access to these markets, which has made it more equal for everyone. Information that used to be only for big trading firms is now accessible to more people. However, one downside of this wider access is that less experienced traders with smaller networks can put their money at greater risk of losing it.
One of the advantages of working on a trading floor is the ability to discuss ideas with other traders, and to see the current market environment from an alternate perspective. This is something that has gradually been lost as retail trading shifts to the personal computer and the home trading station. But some outlets have recognized the pitfalls of these trends, and we are starting to see the emergence of social trading networks that allow traders to discuss strategies, debate the impact of important market events, and even copy the trades of other users in the community.
One of the most comprehensive examples of this new type of trade outlet can be seen at CommuniTraders, which has an extensive educational library, detailed articles explaining various trading methods, a very active trader forum, and trading recommendations from a collection of seasoned market experts. These are the types of elements that traders should be looking for when joining a social trading community because one of the best ways to establish a trading strategy that is successful over time is to get a sense of assess market activity from a variety of different viewpoints. Only then is it possible to isolate and avoid the bad ideas, and side with the highest probability trading strategy.
Removing Bias
Another important benefit that is seen when trading as part of a group or community (rather than as an individual) is that it becomes easier to avoid the personal biases that often result in losing positions. Whether we like it or not, it is impossible to remove our underlying opinions with respect to certain assets, and this is often a central cause of failed trading strategies. Market analysis has to be as objective as possible if we have any hope of finding the best possible assets to buy or sell, and when we trade as part of a group, it becomes much easier to to view changing activity in the market from a more unbiased perspective.
In addition to this, group ideas can make it much easier to manage asset positions once they are open. For example, a trade that starts to show losses can trigger emotional reactions in a trader, and those reactions will often lead to bad trading decisions later. When traders work together as a group, it is easier to discuss and analyze market activity as it develops and to make decisions that are more rational. Does it make sense to close out the position early if losses are being seen? Does it make sense to add to the position at better levels, now that markets have worked in an unanticipated direction? These are the types of questions that need to be asked, and it is very difficult to work out the answers when traders operate in isolation.
Understanding Majority Sentiment
In order to construct a trading idea that actually makes money, we need to have some sense of the majority sentiment that is present in the market. The harsh reality of investing is that you can start with an idea that is logical and well-researched, but if the majority of the market is not on your side, that great idea will add nothing to your account balance. When we trade in isolation, it can be difficult (or impossible) to view the market from the perspective of other traders. The only way to rectify this problem is to discuss the inner workings of the market with your counterparts in the community.
The rise of the social trading platform is a direct expression of the need to converse with other investors. It is quickly becoming clear that trading in isolation is a thing of the past, and can quickly lead to unnecessary losses. In addition to this, trading as a group makes it easier to capitalize on new trading opportunities that might have been missed without the support of a group. Social trading platforms not only make it easier to manage positions once they are open but to watch a larger number of markets, and spot the best trades at any given moment.
To be sure, some social trading platforms have better reputations than others, so it does make sense to research reviews and testimonials first before becoming actively involved with any of the social platforms currently available. In any case, social trading carries with it a large number of advantages when compared to trading in isolation and it is an area of the market that is likely to see great expansion in coming years.