Social Trading

Social Trading in South Africa

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Social trading, a ‘new’ way of trading allows the users to share information in real-time with the rest of the community. In social trading the group (community) needs to be completely involved as it depends on real-time market information. This is the platform where new traders can actually watch and learn from the veteran traders. It lends to a faster learning experience through real-life environment. The beginner will also be able to seek advice from the professional traders during any difficult situation and have a ‘safety net’.




The Popularity of Social Trading in South Africa

Social trading is often considered as the next step of evolution for the platform of social media. It is comparatively a new phase that is rapidly growing in popularity in Europe and other continents. South Africa is becoming a major participant in the arena of social trading. Traders of binary options and forex are going through a completely different experience than the traditional method.  The social trading terminology involves following the market closely by knowing the real-time sentiment and historical charts through the power of the internet. They are basically doing trading analysis through the help of the social platforms. Like people do traditional trading with the help of brokers, there are brokers for social trading. In social trading the trader himself does not have to do the technical and fundamental analysis rather, the information is relayed by other users. It is therefore a comparatively ‘easier’ method of trading forex, stocks and binary options. This is a major reason of popularity of social trading in South Africa.

The traders can access these platforms from everywhere. This is another reason why many South African traders are shifting to social trading networks. The South Africans access the social trading platforms that have faster chatting options and also contain blogs for easy communications.


How to Trade

One easy way of doing social trading for a beginner in South Africa is to follow the experienced traders and copying them. But the real experience for the beginner will be when he learns to understand the whys of the trading and learns to analyse the market situations. In social trading, the South African trader has to trust the community and also has to earn the trust of his fellow members. By observing the track record of the experienced traders in the community, the novice social trader should learn the ropes of trading.

The new trader, instead of blindly following another trader should check out which strategy, implemented by the experienced traders in the community, satisfies all his requirements and whether it does proper risk management. The trader also has to check whether there is a probability of getting a good return on the investments.

When doing social trading the trader needs not necessarily turn on his computer. They can simply follow the community posts and blogs from their smartphones and even open or close a position through the devices.

Just as in social networks like Facebook, a user can view others’ profile information; in social trading the user can also see an investor’s portfolio. Just like the Facebook feed the social trader will be able to view what other traders are doing, when they are entering or exiting a trade and what strategy they are using.

As social trading came into existence partly due to the MetaTrader platform and the Forex market, forex social trading is one of the most popular forms of social trading in South Africa as well as in other countries. The advent of social trading into the market of CFDs has exposed the medium to shares, indices, bonds, commodities and interest rates. Therefore, the South African trader can now choose to do social trading in different financial markets.


How to Choose the Right Social Trading Broker

When doing social trading, the relationship no longer simply exists between the two (the broker and the individual trader). One individual trader will be able to communicate with several other investors as well as the broker. Here, the question lies not only in the trustworthiness of the broker but also thousands of other investors present in the community. Therefore, the first criteria that comes in is whether the broker is regulated by the regulatory body of South Africa and secondly, whether the individual wants to a small community of traders or a large community.

Check out the broker website and how experienced the traders in its community are. Sometimes a small group may have the best strategy makers or a large group that the potential user was avoiding due to the number of community members may contain good experienced traders. It is actually difficult to say from the outside as the brokers will always advertise its best features.

Every social trading broker should display risk warning statements. Any broker advertising that it is easy to trade and an individual will always win a trade is absolutely wrong. The trading world is full of uncertainties and many times the fate of a particular instrument has changed at the 12th hour.

Slippage is another criterion that a trader must check out before choosing a social trading broker. It is the difference in the price that a user gets in his account and the amount the trader he copied received in his account. High slippage means that there can be a great difference between the profits earned by the two traders. A good broker will usually offer low slippage as it will offer the traders with same signals, same spreads and very little time between the copying of the trades. In case, the user is following a trader who is registered with another broker then, there will be a higher slippage.


In future, there will be an addition of a system of automatic reinvestment of dividends. Keep an eye for the next update!



Regulation (FSB)

The social trading brokers also need to be registered at FSB or Financial Services Board to operate in South Africa. The brokers even when they are registered under other regulatory bodies like CySEC or FSA UK should be permitted by the FSB. Many forex brokers offer social trading in a web-based application. Therefore the individual will have to look out first whether the forex broker offers social trading and whether it is regulated by FSB. The objective of the regulatory board of South Africa is to protect the investors from scams. That’s why there is so much strictness regarding trading.


Demo Accounts

A good broker also offers demo accounts to their clients for social trading. This is essential for those who are trying this approach for the first time in order to understand what it actually involves, how the group communicates and so on. This way the trader will also be able to understand the workings of a particular group and choose it on the basis of that. The broker will usually provide all of their social interaction features in the demo account to have real-time like experience.

Risk Warning: Trading may not be suitable for everyone, so please ensure that you fully understand the risks involved. Especially trading leveraged products such as Forex and CFDs carry a high degree of risk to your capital and can result in the loss of your entire capital. Only invest with money you can afford to lose.