What are the Cons Associated with Social Trading?
Social trading developed a novel way of trading. The system relies on the knowledge that other traders have allowing you to mimic their decisions. For a new investor, the idea sounds appealing since you only have to sit back and enjoy the success of copying a fellow trader. However, there are disadvantages associated with method despite the myriad benefits that it offers.
First, mimicking another trader’s move may cause you to become lazy. Trading is an investment, and you should be fully vested towards working towards the best trading decisions. Social trading provides you with an opportunity to copy what other traders are doing to get the best results with little or no effort. As a social trader, you do not have to be alert to specific market changes since the trader that you copy will react on your behalf. As a result, you will no longer enjoy trading as an enticing business since it lacks the excitement associated with speculation and decision-making.
Second, social trading is not a full-proof technique for affluence in online trading. Some people think that copying another trader will always lead to success in trading. However, the selection of a trader to copy becomes a challenging activity. When selecting the trader copy, you have no inkling of the criteria that the trader follows or the goals and objectives that the trader has. If you choose a trader that does not mirror your objectives in online trading, you might end up making losses. Furthermore, the traders that you copy might start making losses despite having a flawless streak of profit-making.
Lastly, social trading relies on the confidence that traders have in sharing their trades. Sharing your deal might feel awkward, and some people might refrain from broadcasting excellent decisions for lack faith. As a trader reliant on social trading, you might find it hard to get a superb trader to copy since they lack the courage to share their investment decisions. Moreover, the brokerage company cannot force you to share your trade if you feel that you do not have the confidence to do so.
Overall, there are three major cons associated with social trading. First, social trading promotes torpidity among traders who rely on other traders on social trading platforms. Second, social trading does not guarantee success in online trading. Furthermore, selecting an efficient trader to copy is a difficult task. Lastly, social trading is dependent on the confidence of traders in sharing their trades.
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