The following is a guest blog post:
Trading in the financial markets has traditionally been a preserve of the financial nerds and gurus with top notch skills in market analysis and equipped with advanced market forecasting tools. However, thanks to technological advancement, new investment and trading channels are being developed every often that are disrupting the traditional ways of trading and investing. Fintech companies are revolutionizing how individuals are saving, investing and trading on their own money; hence giving more power to the individuals to manage their own wealth more easily and conveniently from basically anywhere in the world.
When online trading started, there were very few players in the sector due to few brokers with advanced computer networks to handle the online transactions at ease. In addition, people were a little bit skeptical about investing through online platforms due to the perceived risk exposure to fraudsters and online crime. However, over time the fears have significantly faded off; while more brokers have joined the online trading community to create advanced platforms where individuals log in at their own convenient time to trade.
In the traditional sense, you had to study the market for yourself to understand how the price of the underlying asset you are trading on would be moving within your trading period. However, following market trends and analyzing the effect of every major economic factor on the price movement for your preferred underlying asset classes when trading; can be both time consuming and tiring for non-finance individuals. To further ease the trading process and democratize it so that every individual is able to trade irrespective of their academic background; the concept of copy trading was introduced into online trading. In copy trading or what is also referred to as social trading, you do not need to follow the market; all you need to do is to identify a successful veteran trader on the platform and mimic their trading patterns.
Several online trading platforms among them ZuluTrade have adopted social trading in order to open online trading to more people regardless of their level of knowledge of financial markets. Other platforms have adopted copy trading in order to boost the number of traders on their platforms; which translates to higher commissions for them. Thorough due diligence is therefore necessary before settling on a credible broker and opening and account with them. Through independent ZuluTrade review by third parties, you will for instance be able to get their ratings and be able to make an informed decision as to whether you would like to open an account with them. The reviews often cover a wide range of issues that are of great importance to the trader such as features of the platform, fees charged, support to new traders among others.
Having selected your preferred online trading broker, you can then delve into the platform and start learning how to trade using the demo account before investing your real money. This is meant to ensure that you do not get swayed by the market and lose your initial capital due to lack of skills and familiarity with the trading platform. After learning on the demo for a few days you then transition to your live account and invest your real money. Most social trading platforms accept a minimum deposit of a few hundred dollars into your online account before you can start trading. For some platforms the minimum can go as low as USD 30.
As a new trader using the live account for the first time, it is advisable that you first monitor the leading traders in the platform for some time in order to chart their trends and success rates. Once you have established the top gainers with high success rates, you then choose one whom you will be following and copying their trading patterns. You can as well choose to mimic two or more traders if you are trading in different asset classes where you have different highly rated veterans. Besides monitoring the traders yourself before deciding who to follow, you can opt to use a strategy that will need less time before you can get started with social trading. This involves following the trader with the highest number of followers copying his trades; since naturally that would be assumed to be the best trader and hence everyone want to be like him.
Social trading does not however mean that you should be in autopilot at all times just copying what the veteran is doing. In some cases the veteran will make a mistake and if you were not keen enough on the market trends, you could end up losing all your invested capital too. To be on a safer side, it is advisable to also be monitoring market trends for yourself on the side even as you copy others; in order to minimize your chances of losing and maximize your chances of winning in every trade.