Social trading is a combination of investment methods and strategies based on the 21st century Internet paradigm of online social networking. The underlying factors of social trading borrow from certain aspects of prominent social media sites like Facebook, LinkedIn and Twitter. Online investors who incorporate social trading into their portfolios are often pleasantly surprised at how this innovative strategy can bring significant insight into their investment activities, something which more than frequently results into handsome profits and an overall better understanding of how the financial markets work.

The Rise of Social Trading in the Forex Trading Community

Online social networking has managed to thoroughly transform our lives by providing attractive, efficient and user-friendly outlets for communication, collaboration and media distribution. Social media has created an extremely dynamic online ecosystem that is perfect for conducting economic activities. For the business community, social media fits like a glove thanks to its dynamic networking aspect. For online investors, the effectiveness of social media started with media distribution. The trading of financial instruments, whether it is performed online or otherwise, is heavily dependent on information gathering, dissemination and analysis. To this extent, social media empowered investors by allowing them to not only easily access news reports and economic data releases, but also to share and discuss such information among their peers in an expeditious and friendly manner. In other words, social media initially served to bring online investors and day traders closer together in dissecting matters of interest to their communities. That was just the first step in the evolution of social trading and how it has ultimately come to be an integral part of forex trading.

In recent years, social trading has been adopted by several online investment communities, from institutional investors who closely follow the action at Wall Street to day traders who invest in securities on the major discount brokerage houses, and from traders of future contracts on commodities to individuals who engage in the lucrative activity of forex trading. Of all the online investment communities that have welcomed social trading in their midst, the forex trading community stands out as a shining example of how social trading strategies and the wisdom of crowds can bring higher transparency and economic advantage to the fast-paced world of foreign currency exchange.

The Positive Impact of Social Trading

There was a time when the modern concept of social trading would not have been looked upon kindly, and in fact may have been treated with contempt by stalwarts who believe that forex trading should be approached with a certain level of isolation. When social trading arrived on the scene, some self professed “old-school” forex trading experts dismissed the idea as a gimmick; a simple extension of the much-maligned Yahoo! Finance forums of yesteryear where a few less-than-ethical day traders gathered to disorient the community and engage in dubious penny stock promotion schemes. Social trading is nothing like what these old-hats purport it to be. While it is true that decades ago forex trading was in the purview of lone-wolf types who used archaic jargon such as “trading cable” to describe the USD/GBP currency pair, forex trading in the 21st century has undergone a radical change.

Forex Social Trading What is Social Trading?

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The impact of social trading in the foreign currency exchange markets has been extremely positive, as it has managed to dispel myths and misconstructions about forex trading in general. An important aspect of social trading is about opening up the world of financial instruments to anyone who is interested in participating. Internet discount stock brokerage firms attempted to do this in the past with the use of clever marketing that managed to bring in potential new clients, but often failed to retain them. There is a certain level of complexity involved to trading, and nothing works better to overcome intricate concepts than the support of a vibrant trader community in which members engage socially with each other. Social trading enables platforms where traders can meaningfully connect with each other for the purposes of learning and increasing profits.

A New Model for Forex Trading

Before social trading, a typical forex trading arrangement consisted of very business-like and cold interactions between clients and their brokers, advisors, market analysts, or portfolio managers. There was a certain preference by brokers to establish a certain distance from their clients. The reasons for establishing such boundaries were varied. Some brokers claimed that such distance allowed them to concentrate on maintaining their forex trading platforms operational, while others had more underhanded reasons; namely, to keep clients in the dark about the inner workings of the brokerage.

Social trading has done away with the secretive behavior described above by bringing individual investors to the center of the action. In the case of forex trading, which takes place in a decentralized global exchange where sovereign banks and day traders can participate simultaneously, a social trading platform is only natural. Traders from around the world have a lot to learn from each other, and social trading enables them to do so in a way that favors human interaction. Forex trading is affected by global occurrences, from monetary intervention by central banks to the herd instinct that traders follow in response to certain events. The best way for forex traders to cut through all this noise and avoid information overload is to become members of a social trading platform.

OpenBook from eToro: Social Trading at its Best

Online forex trading platform eToro has always enjoyed a favorable outlook in the investment community thanks to its innovative and whimsical graphical user interface, as well as for empowering its clients by allowing them to access the world of Interbank foreign exchange and finance in a way that’s friendly and warm. While entrepreneurs and finance experts have already tried to bring the social media and online investing realms together, OpenBook is a truly pioneering endeavor in the sense that it successfully incorporates all the concepts of social trading while at the same time increasing transparency and privacy; an achievement that has earned eToro recognition by financial analysts and journalists on more than one occasion. Thanks to eToro’s OpenBook, forex trading has become a more interesting, accessible and just activity.

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