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Many of the readers have probably tried at some point the difficult discipline that is to daytrade profitably.
Some of you have been successful – and daytrade actively today. Others of you have just started daytrading and are testing your skills while others have tried daytrading and found out that it’s too hard to learn, too hard for the psyche or maybe just too time consuming.
But there is an interesting option that allows for both to get the good returns from daytrading, while virtually eliminating all the hard work.
Does it sound too good to be true?
Well, of course, the reality is not quite as rosy, but there is an exciting alternative to daytrading in what is called Social Trading or Copy Trading.
What is Social Trading?
The whole idea of the Social Trading concept is that you can connect to others’ daytrading and swingtrading and then copy their trades directly to your own trading account.
There are already many daytraders who are sitting and spending most of their time trading. What if you could find a list of these daytraders, their performance, their risk profile, etc. and then choose to copy the results from the best ones that meet the same conditions?
How to find the good daytraders
The image below is from the Social Trading Platform, which is integrated in SpreadMarket.
Here you can quickly get an overview of how many trades the individual traders make, what they make in profits, their maximum losses, etc.
The colored flag next to each trader indicates which criteria the individual trader has met. To win all five flags, you must trade for at least one year and make profits, maximum losses must be kept under a certain amount, etc. If the trader breaks these terms for just one month, they will revert to zero flags and will have to start building confidence and results from the start again. This means that, as a customer, you can be quite sure that these traders are fairly consistent in their performance.
If you want more detail, you can also sort the traders by Risk profile so that you can choose traders with low volatility to make your portfolio more stable.
It is possible to use social trading directly from your smartphone.
How to compose your portfolio
Once you have selected some interesting traders, you can put them together in a portfolio to see how they would have performed in the past. You can see monthly data, fluctuations and much more. You can of course put the portfolio on surveillance so you can follow them without having invested money at the start.
Below is an example of a trader’s information.
Advantages and Disadvantages of Social Trading
There are of course both the pros and cons of this kind of trading.
- Minimum time consumption.
- Higher return.
- Greater risk diversification
- Possibility of composing your portfolio based on selected success criteria such as performance and risk profile.
The advantage of this kind of placement of your money is that you do not have to learn to daytrade from scratch and to be tied to the screen every day to make a return. Your money is being traded by experienced traders, whom are likely to yield a much higher return in the end. You can pick and choose between traders on the platform and even decide how risky your portfolio will be.
- Others are trading your funds.
- Limited development of your knowledge about daytrading.
- Slightly higher trading costs per trade.
One of the major disadvantages of this type of capital investment is that you do not even control how your money is invested. Nor do you have a thorough description of why and how the individual Toptrader chooses to trade. It may therefore seem like a “black box” where you only see the result but cannot look into the engine room and follow the activities closely.
In addition, there are slightly higher trading costs on each trade compared to if you were trading by yourself. This happens because the top trades receive commissions per trade, which of course is paid by the customer.
When you hold these pros and cons to one another, you also have to take into account what you could earn from working if you did not have to sit all day in front of the screen. So, the slightly higher trading costs can probably be justified from the point of view that you can now leave the screen and earn another kind of income while the top traders spend time in front of the screen to create results for you.
But this will always be a choice that you as a daytrader should decide for yourself.
Want to know more about Social Trading?
You can sign up for SpreadMarket and click on Social Trading. Here you can see all the hundreds of traders as well as their returns, risk profile and much more.