| Updated: October 30, 2024Social Trading Risk
You will learn about the following concepts
- The dark side of social trading
- Main risks to pay attention on
- Final Words
Caveat emptor! May the buyer beware! So far weve tried to be as explicit of the nature of social trading as possible. Its not easy and its definitely not risk-free. If you want to make quick and easy money, try the lottery – your chances of success are greater. However, since there are a lot of websites sugar-coating social and especially copy-trading, weve decided to create this section in order to dispel any illusions you might have. We want you to know exactly what youre getting into.
What Will We Cover in This Section?
In the following section we will focus mainly on the Dark Side of social trading. Well talk about aspects of the process most trading platforms would rather you didnt know. This portion will not be about learning what to do, but rather what to beware of.
One of the things well talk about is how traders can inflate their numbers in order to appear more successful than they actually are. Some of the platforms, like ZuluTrade and eToro have a certain list of successful traders you can follow. However, following those traders isnt a guarantee at all. You need to be aware of the risks and that its quite possible for a trader to end up on the list even though he does not belong there. Well explain how thats possible and what you need to look at in order to avoid this sort of traders.
Trading is a risky business no matter how good you are. There is never a guarantee and we want to make that point abundantly clear. Even at the best of conditions, when you think that youve managed to predict everything, there can still be something youve missed. Unforeseen consequences and conditions are a part of the game. No matter what someone tells you, investing your money means that youre taking a risk. There is never a guarantee and if someone does guarantee you anything, then you need to beware because it could be a scam.
Well also talk about overexposure and why its bad. Weve briefly touched on the subject when we talked about money management, but then it wasnt really the place to explore this phenomenon in detail. Well make sure that you understand what overexposure sure and how it can be harmful to your portfolio. By the end of the section, you should know that social trading is by no means a walk in the part (in case you didnt already know that).
Why is This Important?
The Internet is a wonderful place full of information. Sadly, most of the information is false at best and as a long-term Internet user you need to learn to tell the lies from the truth. Social trading, one might say, is a child of the Internet, and as such it has inherited some of its parents negative traits. Most social trading platforms are interested in getting you to spend your money with them. The more you lose, the better, as long as you come back again. Theyre not all like this – some genuinely try to help and educate their users, but others will tell you anything they think you want to hear. 300% profit in an hour? No problem, they will promise you even 400% if thats what it takes for you to choose them over the competition. They can promise you anything. That doesnt mean that the promise will be kept, though. This is advertisement, after all. Its a formal, legal and socially acceptable variation of lying.
This is where we come in. We are going to burst the bubble and help you see the risks and think carefully about joining the ranks of the social traders. Dont get us wrong – we think social trading is great (otherwise we wouldnt be making this guide, now, would we?). However, as weve said multiple times, its not as simple as it seems, and its not for everybody. We dont want anyone to get into the game with all their last savings and get ruined because they were promised 500% return. This is how things are on the Internet – if it seems too good to be true, it probably is. And we are here to debunk some of the myths surrounding social and copy trading.
Final Words
There is a lot of mystery surrounding social trading and we are here to lift the veil. Social trading is a great way to make money, as well as to learn how to trade, as a whole. However, its not as glamorous as some sites try to make it look and were here to show you that. Forget about the unicorns and rainbows – becoming a trader will be like any other undertaking in your life: it will require discipline, time and dedication. It will require hard work and sacrifice. Not everyone can be a winner and if you dont work hard enough you will end up in a terrible financial position and you wont even see it coming. We want to make sure that doesnt happen .We want you to be prepared. We want you to be ready.