6 Steps to Social Trading
12/28/2015 6:00 am EST
Given that social trading has proven to be a tremendously useful tool, Yael Warman, of Leverate, highlights six baby steps every novice trader should take initially before he takes off running.
The human psyche is preprogrammed to be influenced by peers. When we are children we look at our parents for approval, then during our teenage years we turn to our classmates and friends to drive our behavior. As adults, prior to the vast induction of the Internet, we would turn to consumer guides for recommendations and today, with the wide spread of social networks, reliance on peer recommendation has taken a life of its own.
Years ago, financial traders worked on a trading floor, giving them the opportunity to discuss ideas and market conditions with other traders. With the introduction of trading in personal computers from anywhere in the world, this opportunity of sharing information with peers has been somewhat lost.
Financial technology providers have realized that the combination—between the human need to rely on someone else’s perspective in order to make a decision and the popularity of home trading—presents an incredible opportunity for innovation and have created—within the past few years—social trading platforms.
You know what they say, “Learn to walk before you run.” Baby steps are the foundation for everything. I believe that to be true for financial trading as much as everything else and that’s why I love the integration of social trading into trading platforms. As a novice trader, social trading can prove to be a tremendously useful tool, allowing you to watch what more experienced traders are doing and copy their actions or use the analysis done by others to base your trading decisions on. But how do you know who is a good master to copy?
- Choose a trader who trades instruments you feel comfortable trading
- Choose a trader who has a similar risk-taking level to yours
- Find a trader with a P&L you feel comfortable with and a low Maximum Drawdown
- Find a trader who has been consistent with their earnings for a period of at least one year
- Check the trader’s pips for individual instruments
- Choose a trader with positive slippage rates
By Yael Warman, Content Manager, Leverate