In the past year, several of the best Forex brokers have introduced the concept of social Forex trading. The idea is simple: the best Forex traders share their trades with the community, and other traders are free to copy their trading strategies. It’s a novel idea, and one that allows inexperienced Forex traders to learn from Forex experts.
Many of the best social Forex brokers allow you copy trading to search for traders to copy based on profit, risk level, and the number of other traders copying a Forex trading expert. This makes it easy to find popular Forex traders to copy, but there are several things you should take into account when copying a Forex trader.
“Popular” doesn’t always mean “best.” Most brokers allow you to see how many people are copying a Forex expert. However, the number of copiers alone doesn’t necessarily indicate a strong trader. Many times, users will flock to a trader after he makes one trade with big profits, hoping to score again. A trader may have thousands of followers, but that doesn’t mean the followers are making any money.
Don’t copy a Forex trader just because of large returns. Just like a trader’s popularity, a trader’s Forex trading results can be a little misleading if not read properly. One of the most popular Forex brokers has dozens of traders whose stats reflect a 300% Forex trading profit. This is an amazing number, but you must consider the number of trades and the amount of capital risked to earn these profits. If you don’t have a large trading account, you may not be able to survive the drawdown incurred on the way to those large Forex profits.
Check the risk profile. Most top social Forex brokers will offer some kind of measurement of a trader’s risk. While many of the high-risk Forex traders manage to secure big profits, the strategies used might not work for all traders. Beginning Forex traders, in particular, should copy traders with lower risk levels so that a single trade doesn’t put their entire account at risk.
Diversify! Don’t risk your entire Forex trading account copying a single trader. Instead, choose a few different traders and split your money among them. This will reduce your overall risk, since only a portion of your account will be in jeopardy if a trader engages in a risky trade. Yes, you might miss out on a big trade opportunity now and then, but consistent Forex profits are the goal.