To some extent, copy trading has been discussed in terms of binary options trading. This is when another successful trader takes over your trading account and makes trades for you. The concept behind this is that by having someone more experienced handling the trades for you, you will have a greater chance at success.
Social trading related articles:
- What are the Advantages of Binary Options Over Other Forms of Trading?
- How To Be Successful At Binary Options Trading?
With social trading, you have more freedom and choice. You are given the opportunity to mimic successful traders but are under no obligation to do so. Despite this freedom, there are many traders who are pondering whether social trading is a scam. Here, we try to determine an answer:
How Does Social Trading Work?
The first thing that you will need to discern is the precise structure of this concept. How does social trading work? There are several websites that offer traders the chance to copy one another. The easiest way to describe this setup is to imagine a social media network.
For all intent and purposes, it is quite similar. Here, you will be able to see what the traders are doing and whether or not they are successful in their attempts. You can choose to follow certain traders to see how they are faring.
Here, traders are often given two options. The first is where you can set link your account to another trader’s and when set perimeters are met, the trade is automatically placed. Of course, in this instance, it becomes a lot more like copy trading than social trading. However, traders are also given the option of simply watching somebody and mimicking the trade on their own terms.
Is Social Trading Scam?
Now, you need to be quite sure about the website that you are using. While there are several legitimate sites, there are just as many frauds on the internet. With the authentic sites, social trading is not a scam. This is because that you can simply follow different traders and see what they are doing.
At the same time, there are a number of problems with such a venture. The first is that there is no guarantee that such a process works. You can’t simply determine that a trader will be successful in the future just because they have done so in the past. The other is it is not always apparent just how much a trader is placing on a trade, just that they were either right about the trade or not. This could mean that your profits or losses could look a lot different to theirs.
While social trading has a varied chance of being successful, you should take care to not partake in copy trading. It is not wise to hand over your account to someone else, especially when you don’t know who they are.
Are There Any Advantages To Social Trading?
Especially if you are just starting out with binary options, this method could prove to be helpful to you. In a way, it can act as a learning tactic. You should be aware that it is not a free service, however, and that the percentage you pay to the website can be quite considerable.
However, if you just want to get your bearings, this may be right for you.
Social trading is not a scam. It is, nonetheless, fraught with several uncertainties and some faults that could prove to be quite disabling to some traders.