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Social trading, how to choose the best traders

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Social trading, how to choose the best traders

Check out https://www.acorn2oak-fx.com/forex-social-trading.html for further reading

How to choose the best traders through Copy trading? Taking the example of the eToro Broker, which is widely seen as the Broker that offers the best Copy trading, it is possible to choose the traders by looking at the percentage of earnings of the last year.

As well as the level of risk. We suggest not to dwell on trivial elements such as the photo or the nickname. A beautiful smiling face or a nickname linked to a fierce character does not mean anything. And it is certainly not synonymous with success.

Most brokers generally don't allow you to invest more than 20% of your portfolio in just one trader. And that will protect you from heavy losses. The diversification, therefore, remains one also regulates Social trading.

After all, traders are still human beings. And as such, subject to errors. However, do not believe those brokers who boast easy earnings through infallible automatic software. Who say they work for you and make you earn.

When in reality you will soon discover that you have also lost the money you have invested, even with a regular complaint.

For the choice of traders, we, therefore, recommend analyzing his strategy, his success, his risk management, and so on.

The two elements to be evaluated are the Performance and the Risk, let's see how they are calculated:

Performance

It represents a yardstick for how much that trader is earning. And it is calculated with this formula:

(Portfolio (T) + Deposits) - (Portfolio (t) + Deposits)

(Portfolio (t) + Payments

Risk

The concept of risk is based on VAR, not to be confused with the slow-motion on the pitch introduced in Serie A matches. But it is an acronym standing for Value at Risk.

Let's take an example :

In 200 days of trading, only in 10 days, we have achieved a loss of more than € 10. Now our VAR will be given by these € 10, which is the maximum daily loss we could have with this investment, but with a probability of 95%. That is, there are only 5 chances in € 100 of losing more than that € 10.

That said, the system will then determine who has the largest VAR, on a scale of 1 to 10, to determine who is riskier. Where 1 stands for minimum risk, 10 instead for maximum. Whoever has risk 10 has a 95% chance of realizing a very large loss with his portfolio!

The maximum loss incurred therefore represents not the risk but the maximum loss incurred in the period. Therefore, it also represents the risk you take by copying that trader.


Copy-trading advantages

What are the advantages of doing Copy trading? Without a doubt, the most relevant is that you can already make money when you are starting by following what experienced traders do.

Of course, we reiterate that even experienced traders are people of flesh and blood. So as such they can make mistakes. Therefore, do not be under the illusion that "following" an experienced trader has solved all your problems.

But many brokers, at least the most renowned and reliable ones such as eToro, allow you to stop a position earlier if it does not convince you. And to invest only 20% of your portfolio.

Social trading and Copy trading differences

What are the differences between Social trading and Copy trading? We can say that with Social trading we mean a broader discourse of trading but within a community.

Social trading includes Copy trading itself, which, as we have said, is a branch of it. But Social trading is also intended as the Forums that exist on Brokers on which it is possible to exchange opinions and advice.

Just like you do on social networks. Furthermore, on many brokers, it is intended as a simple acquisition of information by seeing what other traders are doing.

Instead, Copy trading is a more extreme and practical concept, as it is as mentioned, a function that allows you to copy the most experienced traders. Which in turn go there to gain from being copied. The more users copy you, the more the Broker rewards you. In addition to giving you greater facilitation of services.

What is better between Social trading and Copy trading? It depends on you, on what you want to do and on what your level of preparation is in the matter.

Social trading, as we have seen, only allows you to find information within the trading community. But then you have to make the choices, offering you total decision-making autonomy.

Instead, Copy trading is just a copy, albeit leaving you room for decision. Both are risky in different ways.

https://www.acorn2oak-fx.com/forex-copy-trading.html explains more.

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