Social Traders use a trading strategy in which an investor observes the behavior of their peers and executes trades by copying and/or by mirroring them.
It requires little knowledge of the financial market but provides a lot of knowledge of how it works.
Social trading, to put it in simple terms, happens when investors look at what other people are doing, compare strategies (if they have one) and follow them into trades either by the usage of copy trading or mirror trading.
Platforms which allow social trading, provide their users with networking capabilities and data-feeds of what users are doing which makes it possible to closely follow other investors.
There are basically two different types of social trading.
1. Copy Trading: where one trader places the exact same trader as the other
2. Mirror trading: where one user will automatically execute every single trade that another user is making, thus following each and every move he makes
Other possibilities include copying an entire portfolio and copying dividends (by withdrawing the in exact same proportion).
Cooperative trading happens as investors can form trading teams, share their due diligence, and even pool their funds. There’s also an argument to be made regarding transparency and information flow.
Since everything is out on the open, information is very real and can be freely exchanged.
This makes the case for users to be actively working together against the market, furthering increasing their likelihood to profit. Experts are already call it a “non zero-sum game”.
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