Forex trading has always been a well-known way to make money on the Internet. Over the last decade, literally hundreds of Forex brokers have popped up, each claiming to offer the best Forex trading training and education methods to help new traders earn easy profits.
In the last few years, however, a new phenomenon has developed: social Forex trading. Several brokers have realized that new Forex traders are overwhelmed by the amount of education and practice necessary to become successful Forex traders. Simply put, most new traders expect to make currency trading profits immediately, and are sorely disappointed when their broker fails to provide. Social Forex trading addresses this problem by allowing traders to view the trades carried out by the brokers’ successful, veteran Forex traders. The new traders can then copy the veterans’ trades exactly, earning similar profits.
This seems very easy, and perhaps too good to be true. While it is easier than learning to trade Forex by reading countless hours of lessons and learning technical analysis, it’s not quite as simple as clicking a button and becoming rich. Now traders have to decide not only which Forex broker to use, but which trader to copy. This can be a tricky decision, but here are some pointers to help:
- Choose a trader with a low risk profile. Many of the best Forex brokers will analyse a trader’s history, amount of margin used, size of trades, etc., and use that information to create a risk profile. In some cases, a high-risk Forex trader might produce larger profits in less time. However, for a new trader, it’s unwise to copy such a trader, because they may commit too much capital to one trade, and this would put the new trader’s account in jeopardy if the trade should go bad. A low-risk Forex trader will not make such trades.
- Choose a broker who allows you to diversify. You wouldn’t risk all your money on one stock or commodity, so why would you invest all your money with a single social trader? Instead, find several low-risk Forex social traders and spread your money amongst them. This will reduce your overall risk, while still allowing you a nice profit.
- Choose traders with a history of success. Most brokers’ websites will list their most successful traders by profit percentage first. While this is a good way to find successful Forex traders to copy, it is wise to dig a little deeper into the statistics. One good trade could push a trader’s profits very high on the list, but that’s not helpful for choosing which Forex trader to copy. Instead, look for traders whose equity has increased consistently over the course of six months or even a year.
Following these steps will help to reduce your Forex trading risk and allow you to find the best social Forex traders to copy. Good luck, and happy trading!