Social trading has been the topic of investors in recent months! Although there have been on the market for years, online providers have been multiplying in recent years by offering copy trading services. Some platforms apparently put less emphasis on qualifying their best traders than others. On the other hand, other providers at least make sure that their traders are on the market with “real”, i.e. their own money. This fundamentally creates more confidence, because the trader then earns his money not only through spreads or commissions, but also largely through his own trading profits.
In fact, social trading is a good thing and a good addition to your portfolio, because the respective traders work for you for a small commission and in the best case increase your capital quite comfortably. Especially for inexperienced traders or investors who simply don’t have the time to follow the markets all the time, trading through a Social Trading Broker is a useful tool to try to grow your capital. Nevertheless, even as a so-called follower, you have to follow a few rules that fundamentally contribute to the long-term success of this trading model. The actual profit from your social trading
activities depends on how intensively you want to deal with the issue. In the meantime, I have tested several providers in this field over a longer period of time and have come up with a clear result. Find a guide for the french market on
https://www.droitdunet.fr/ , But first of all I would like to present you with the ten golden rules of social trading, which are the result of my observations and experiences:
The ten golden rules
Always choose a broker whose profile of the trader you wish to follow is also clear. In addition to the current portfolio, you should also be able to see a basic investment style or strategy, as well as a brief history of recent transactions and certain risk control measures such as maximum drawdown. A quick glance at this data can tell you whether the trader is a solidly working player or professional who is interested in the long-term growth of his portfolio!
Most platforms offer your traders the possibility to receive a performance fee within certain limits, which must of course be respected. Just to motivate the trader at all times to achieve maximum results for you. To do this, he does the work that you don’t want or can’t do – research! Depending on the platform, very different rates are applied, which are usually between 5 and 20% of the profit made. Fair models stipulate that the trader only receives remuneration from you when his portfolio has reached a new peak (High Watermark). With other platforms, you do not pay any performance-related fees at all, but only the usual spreads, of which your trader then receives a portion. So when choosing your trader, make sure you have a transparent and fair cost model.
Before getting started, it may be useful to consult a list of your favourite traders. This is especially useful if the market is currently in a fairly volatile phase. For here the chaff separates from the wheat, as it is called o beautiful. A good trader will try to make you earn money in every phase of the market. He has mastered the keyboarding of the FF’s “long” and “short” walk and knows how to use it accordingly. A glance – especially when the markets are down sharply – at the trader’s portfolio reveals a lot about his trading plan!
Nothing is safe on the stock market! But if you already know that the money you’ve deposited is not dormant in some group accounts that you don’t have direct access to, then this is a very reassuring feeling. Good brokers manage each client account as a so-called “separate” client account, which is completely separate from the brokerage’s accounts. This means that in the event of the broker’s insolvency, your money will always be safely stored in your personal account, ready to be called at any time, unless a trade of a partial amount has just been executed. When you close a position, your money is saved in your account again and again without any detours. So pay attention to how your money is routed and exactly where it is!
5. les mauvaises transactions et les pertes
Even a good merchant can get a few bad deals in a row. The experienced trader will then smooth out the positions, shake briefly and rethink his strategy. He may take a short break by not making any trades for one or two days. After that, performance should improve significantly. So give your trader a second chance and don’t go back and forth in a frenzy. Someone who has proven in the past that he or she is able to perform well will do so again in the future.
Remember that the stock market is not a one-way street and that losses are as much a part of it as profits! At the end of a trading period, it is possible to make a real statement about the quality of a trader. Profits should then exceed losses.
6. The availability of the broker
A good broker is available to you during main trading hours and takes care of your problems, regardless of the size of your account. So whether you manage a securities account of 1,000 euros or a million euros, you should always be competently taken care of. Customer service in German is also very helpful, although it is not necessarily mandatory if you have a sufficient command of English. What is mandatory, however, is the accessibility of the sales platform in every phase of the market. I personally know large, internationally oriented brokers whose platform regularly falls to its knees when the market enters a volatile phase. This is an absolute “no” and it rarely happens with smaller brokers, who have apparently provided the appropriate infrastructure in a timely manner, for example in the form of a dedicated server. The very size of a broker therefore says nothing about the reliability of the trading interface!
7. Continuing education
A good investor is constantly educating himself to understand exactly what is happening in the market and with his money. Even if you don’t have the time or desire to get closer to the subject, it is your duty to invest at least a minimum in your personal education. The fully automatic money printing machine does not exist here either! Once a week to think about current positions and review the trades your trader has made, but in most cases this may be enough. Some brokers also offer highly instructive videos on their platforms.
The death of any merchant is a matter of greed! Especially in social trading, an investor’s long-term success is characterized by knowing when you can be on the move with high stakes and when you need to reduce your exposure instead. Depending on the phase of the market, it therefore makes sense to adapt the investment strategy to the circumstances. A good social trader will do this for you by trading smaller positions and generally making fewer trades, or changing direction in a flexible manner. So don’t try to take every euro out of the market at any price by jumping back and forth, but choose, for example, five traders, spread the risk and let things run their course.
If you are a rather anxious person who even worries about a temporary loss of five percent of your savings account, you have to ask yourself the serious question whether Trading is generally something for you or whether you prefer to be satisfied with the micro interest rates of your savings account. In all other cases, losses are part of the business. The sooner you learn this lesson, the more successful you will be. Losses must be constantly limited from a certain point on, but they are not fundamentally a bad thing. A small accounting loss can always turn into a big profit in the end if you follow a strategy and implement it consistently.
10. money management
We are perhaps at the most important point: money management. Ask yourself how much money you can or want to lose per trade or trader. Of course, this value depends on the size of your personal portfolio. A small loss with a single trade can be compensated at any time by a new trade, a big loss is much more difficult. It is therefore essential that you protect your available capital by dividing it among several traders. If possible, you should ensure that these traders follow different business approaches to further minimise the risk.
By following these 10 golden rules of trading, you can help to reduce your risk.
By following these 10 golden rules of social trading, you will almost inevitably succeed in the markets – at least they helped me a lot! Like almost every other area of trading with equities, currencies, commodities or CFDs, this type of trading has its own particularities that need to be respected. Overall, my personal impression is that this industry is still in its infancy and that it needs to be optimised at some point, but that it will prevail in the long term. Whether you want to become a social trader by trading certificates, or enter the Forex trade directly, depends a little on your time horizon and your profit expectations. In Forex trading, significantly higher profits are usually achieved through high trading frequency. The individual profit is manageable, but with 20 to 50 trades per day, it adds up accordingly. Price gains of 500 to well over 1,000% are possible here with a top trader within a year!
With certificates, you need much more patience and are more dependent on the general market situation and the
long-term motivation of the trader concerned. The focus here is usually on long-term asset growth. However, the criteria
for selecting the tracker are also a little more demanding and time-consuming, as you have to monitor the individual items in addition to the actual performance. It is not uncommon for initially successful certificates to become true underperformers a few weeks or months later, resulting in regular changes and corresponding fees.
Conclusion: If you are interested in social trading, here is an initial guide to what to watch out for. Basically, I personally prefer short-term increases in value, i.e. the largest market in the world where it is possible to carry out transactions 24 hours a day. Forex trading is an area in which very few private investors are well informed, but it can be very profitable. Even for small amounts, you can open a securities account with a broker and follow the professionals in currency trading. You can decide whether you want to follow the trader on a percentage basis. (e.g. 3% of the deposit amount per transaction, etc.) or absolutely, i.e. with the same amount as that used by the trader. Everything else is done automatically and you don’t have to do more than the checks described above and check your list of merchants from time to time.