Brokers use any possible ways to attract customers in exchange trade. In principle, it is clear that the actual number of active traders amounts to 200-300 thousand customers, around 1.2-1.5 million people have registered an account and at least once tried to trade. In comparison with Europe and the United States stock market in Russia is not developed. The financial literacy and understanding of the work of the same Forex or stock market is absent. Since MMM the word “Forex” in humans is associated with frauds and pyramid and, alas, in many ways, this image was formed by the brokers themselves, who do not give their clients full representation about what the client will have to face.
One of the very popular “tricks” of the Forex-brokers —copying of trades or social trading. In their advertising broker proves to the client that he does not need to do anything — get in a terminal and copy trades of successful traders. Well, or open opposite from the end of the list. However, the access list can be obtained by opening an account at least average (that is, with a deposit of $ 1,000), but it is all trifles in comparison with the chance to duplicate the trades of successful traders.
The danger of copying traders trades: why social trading is a trap
First question: if you see that the trader is working successfully on the stock market, why copy his trades if you can pass him the money in trust? Agree, it is unlikely you will trust the signals of the trader, without receiving maximum information. A trust management or the same PAMM-account, in my opinion, simplify the issue of copying traders trades.
Typical error of copying trades of the traders:
- portfolio diversification. Every trader has its own strategy of risk management. Large traders diversify its portfolio, thereby reducing the risks. Question: do you have enough money to repeat this strategy? A big trader can afford a loss, for him – it is only 10% of the losses (conditionally), but for you it is the entire deposit. A big trader can afford to risk, holding long stop loss. Can you afford something similar?
- mismatch the source data. Have you noticed that in the description of the strategy, for example, that the strategy or expert Advisor work best with a deposit of for example $ 100? Yes, the strategy can not be universal and work equally in the same conditions. And if you copy transaction for a smaller lot, not the fact that the result will be the same. By the way, large traders, on the contrary, squeeze small ones by the capital;
- lag, slippage, etc. Even if you and a traders have the same broker, not the fact that applications will be made in the same way. Why? First, you don’t know all the agreements between the broker and the trader (can be customized), and secondly, the application may be executed differently or even with a time gap. When the trader’s order will be closed and your will slip, you can blame only yourself.
Summary. Copying trades of traders — it is only a shell advertising, which entice the inexperienced. This tactic could make sense in binary options, where lot sizes and slippage do not play a role, but I do not recommend to copy anything from Forex or stock market. I suggest trust less to advertising and to carefully consider any attractive offers of the brokers. No one is saying that the brokers are scammers and they try to entice the customer money. But marketing move has not been canceled!