It seems like social trading has become all the rage recently. Forex brokers have been announcing their offering of various social trading platforms. These forex social trading platforms usually score and rank the most successful Forex traders based on profitability. They then allow the user to either follow or follow and trade as a particular trader. The follower opens a live account with the broker and selects who they want to follow deposits or money and wait for the results. In theory this sounds all well and good but for a practical matter the results are usually not the desired effect for the account holder.
The biggest discrepancy that could cause a problem is the amount on deposit from the account holder if this is dramatically lower than the amount of the trader that they're following this can obviously cause of problems with regards to draw-down. For example an account holder who opens an account with $500 cannot sustain the draw-down of an account that he's following that has a balance of $10,000. Another issue that is presented is that the spreads that the account follower are usually wider than that the account that they're following. This can obviously have a negative effect on the profit and loss of the account.
There are other effective ways of you so using social networks to trade from. Twitter and other social networks can be a very effective tool to have market information in a timely manner. Having timely market information is as effective if not more effective as mirroring the trades of a successful trader. There are platforms that provide filtered information from reliable sources to trade from. By having the right feeds and news sources a trader can focus on their particular strategy without becoming distracted.
Social networks can be an effective tool for forex traders if used correctly and if the trader does not allow himself to get lost in some of the noise of social trading.
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