There are many forms of social trading binary options and they all amount to one thing; trading tips and signals. The beauty of social trading is that it puts control back in the hands of the traders by facilitating the free exchange of information, namely advice on how to trade, which brokers are best, education, market analysis and signals. The caveat is that the brokers have learned to use the attractive qualities of social trading to lure traders into deposits and trading. What follows here is a quick a how to guide into the types and platforms for social trading to help you understand what is on the market and where to get the best bang for your buck.
Social Trading Tools
Trader Sentiment/Investor Sentiment – This is a simple tool that may come in a variety of forms but all based on the same idea; that the market can tell you which way to trade. These tools typically give a rating of the market, of who is trading the asset and expiry you are looking at how they are trading; bullish or bearish. You will find this tool embedded in the trade platform in the form of a bar or graph that shows which percentage of the market is bullish or bearish. The stronger the sentiment the stronger the so called indication. The caveat with this tool is multifaceted.
First, you have to assume the tool is legit. Unregulated off-shore scammy brokers have no reason to give a legit tool, and no one to ensure that they do so you can’t really trust it. Second, if the market was so smart then most traders would be rich, right? The reality is that most traders are are not smart and get wiped out of the market so these sentiment indicators are at best a contrarian indication. Bottom line, I don’t use them and don’t trust them although they are interesting to look at sometime.
Signals/Tips – Signals and tips are usually the first thing new traders go for. Not to mention the fact that old traders tend to gravitate toward them as well. These can come from as simple a source as a trader sentiment indicator all the way through managed accounts sophisticated computer generated systems. Usually no interaction occurs between traders and no learning takes place which makes them a dead end for most traders too, if you get wiped out and you didn’t learn anything then you are in worse shape than you were before you started trading. Bottom line with signals, if you are lucky you might make some money but it is more likely that you will fall prey to fraud since the get-rich-quick aspect of signals and the desperation of some people to get rich quick make them a top choice for scammers. One service that I like and endorse is Investoo.com. They offer a full compliment of signals and indicator systems, more than 300 hours of educational videos and live support.
Copy Trading - Copy trading is just what it sounds like. This is the practice of copying other traders. There are a wide variety of binary options platforms that allow you to copy another trader and mirror their success. When you choose a trader from the leader board and set your account to copy them every trade that person makes is also made in your account. There success is your success. There are usually controls available to manager your account so you aren’t blindly following which include max trade size, max number of trades, amount of time to copy and max loss.
Copying is great for those who would like the experience of trading without any of the hassles that come with it but it is not all wine and rose. Finding a good trader isn’t as easy at sounds and there is no guarantee of their future success, not to mention the fact that many platforms are populated by robots which in some cases makes copy trading riskier than trading for yourself. I prefer to have as much control as possible over my traders because it is important for money management.
I like to keep control over how much is made on each trade so that no one trade will wipe out my account and I like to be able to choose which assets I follow as well as the trader. The SpotOption and CopyOp platform have done a great job with this and there are several top brokers offering it.
True Social Trading
The one thing that all the broker supplied forms of “social trading” lack is the one thing that defines what true social trading is; social interaction intended for the benefit of the individual traders and the trading community at large. It includes forums, profiles, blogs, articles and yes the brokers and copy platforms but above all social interaction. Traders have to be able to communicate with each other or else it’s just not social.
Forums and profiles are the very core of true social trading. Forums allow you to talk to other traders directly, profiles help you get to know who they are. The best platforms will provide full profiles with biographical information, details about trading style as well as a tally of open and closed trades. The plain copy trading platforms may give you a name, a top asset and a win rate but not much more than that and they rarely have a forum attached so you may have to go looking for one to support your trading account. I participate in two forums, Communitraders and BinaryOptions.net, where you can find me and many other traders discussing all aspects of binary options, technical analysis, the economy, forex, tips for trading NADEX, strategy and just about anything else we can think of.