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Social Forex Trading - Complete Guide

Updated on June 12, 2014

What is Forex?

ForEx or Foreign Exchange is a global market for currencies. Trading is 24 hours a day except for weekends and accessible from any point in the world.

Forex is by far the largest market in the world with daily transactions in the TRILLIONS... Not millions, or billions, TRILLIONS of dollars. This offers high liquidity and high chance of cashing in. The biggest traders of Forex are major banks across the globe. However, it's also available for you and me.

Trading is not limited to currencies in forex, it also encompasses main commodities like silver, gold and oil!

The reason why Forex is awesome? No matter what the economic status of the world market is... Forex will function and bring you profit if you know how to use it!

I know what you're thinking... AINT NOBODY GOT TIME FOR THAT! And you're right, I know you don't. However, there are some people who do and they have platforms where they share their strategies as well as allow you to copy it for free. You don't even have to be there, you can just let your account copy the experts! That's NOT the secret I'm sharing with you. Traders familiar with social trading are aware of that. I'm about to tell you how to choose someone and how to set it up.

Risk Disclaimer

We are in no way responsible, liable or in any way connected to the success or failure of information presented on this hub. We offer the information in good faith with the understanding that it is both accurate and correct.

A degree of risk is always assumed by those involved in trading.


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What is eToro and How can I use its social platform OpenBook

eToro is a successful Forex platform that's been around for many years as one of traders' favourite platforms. The key to eToro and its success in attracting millions of traders online from all over the globe is the level of friendliness and ease of the platform. eToro has been around for years, has excellent customer service and is easily accessible. Even the most amateur of traders can start with eToro.

Moreover, eToro offers very attractive options that are not necessarily found with other platforms. These include: low spreads, fast withdrawals, no commissions, no rollover fees and no dealing desk.

In addition to it's long held reputation, eToro providers it's traders with an ongoing social trading platform that allows every trader to interact with other traders, see what they're doing, discuss their choices via live feeds and discussion. What's more... they actually allow traders to select other more experienced traders to copy! You are allowed to see the choices they made, the profit they gained both short and long term and whether or not they have been consistent... AND IT'S ALL AUTOMATIC; you do not need to lift a finger.

I don't think it can get any easier than that. A simple platform, allowing very small deposits, lets you see what experts who consistently win money and in addition, lets you automatically copy their trades if you choose to! Not only are you able to determine who to copy, but you also determine how much of your deposit you wanna put in these copied trades. Oh, and wait... you can copy many traders at the same time rather than one at a time!

So, how do we do that? Where do we start? Hold on, we will get there soon enough

eToro Social Trading

HOW TO START

A wealth of training, courses, and information is available at eTORO!

I will show you how I choose the best traders and setup my account so that it can make money for me, even while I'm sleeping!

The information presented is both form experience as well as help from the guide sold online called "Trader In Pajamas"

FIRST STEP: SIGN UP

Open an account by clicking on the link to the right and click on the “Create an Account” button or by clicking on the large “Start Now!” button which will prompt you to either sign in or sign up. If you are signing up, several options are presented to you: sign up using your Facebook account, sign up using Twitter or LinkedIn, or sign up with your email address.

SECOND STEP: FUND YOUR ACCOUNT

To fund your account, you need to be logged in and click the blue “Fund Your Account” button on the top right-hand side of the page. Remember, the minimum is $50. A list of deposit options includes:

  • credit card (Visa, MasterCard, Diners Club)
  • PayPal
  • Skrill (MoneyBookers)
  • Neteller
  • WebMoney
  • Western Union
  • MoneyGram
  • wire transfer
  • deposit with promotion code



So I signed up in eToro, now who do I copy to make me some money?

Step 1: Find expert traders who will bring you the highest possible profit. In order to ensure you’re looking only at traders who are currently active on eToro and are making more than 100 trades per month, make sure to check their profiles.

This is done by accessing the the ranking page by clicking on the “People” tab at the top of the homepage http://openbook.etoro.com/rankings.

Consider a trader’s overall win/loss ratio rather than his or her percentage gain or number of profitable weeks when searching for high-volume traders. Some traders will have a bout of luck for the past two weeks with huge earning! THAT'S NOT WHAT WE ARE LOOKING FOR. If you are a high risk trader who is willing to "high risk" your money....go ahead. However, form experience, you are better off with people who consistently make small profits!

Step 2: Assess the trader’s comfort with risk - aim for lower risk investments. This goes in conjunction with the first point made. Some traders are willing to risk a lot and they might make a nice sum of gain every now and then... but their losses will eat up that profit just by making one mistake.

Use the risk parameter when filtering search results and move the blue bar to“Low” or “Medium” or click on the “Low Risk, High Gains” popular search.

Step 3: Make sure the trader is an expert - check out the trader’s live feed to see if he or she is copying other traders or making trades him or herself. You don't want to copy copiers,y you want to copy those who are making the decisions themselves... hence the word expert :)

Step 4: Compare the trader’s realized equity and total equity - go to a trader’s profile and click on the “Stats” tab. Look for a green line (realized equity) with a definite upward trend that is either consistently BELOW the blue line (total equity) or CLOSE to the blue line. Avoid green lines with a downward trend, a blue line significantly below the green line or erratic graph lines.

I found the experts, how do I copy them?

1) Type the trader’s name you’re interested in copying into the search bar, or click on the trader’s name anywhere you see it on the platform.

2) Once on the trader’s profile, click on the blue “Copy” button under their profile picture

3) Choose what percentage of equity (the total amount of money you have available in your account) you want to use to copy the trades this trader makes. Use the “+” button to increase the percentage, and the “-“ button to decrease the percentage. The amount of money this percentage represents is automatically calculated. Do NOT have more than 15% of your equity under one trader! Everyone makes mistakes and I find this to be the safest number.

4) Click the blue “Copy Trader” button once you’re ready to begin copying the trader.

Risk Management

There are a couple of ways to minimize your risk when copying other traders.

1) Diversify your portfolio:

Although strictly speaking you can copy multiple traders at the same time (20 if you want), you want to limit that number between 3 and 5 traders. Since we picked experts with low risk behavior, this should be just about right.

In addition, having a number on the small side allows you some ease in monitoring who's making you profit. That way you can cut off the ones that are not performing early on, although I recommend giving each trader at least 2 weeks.

2) Percentage of equity:

Distribute your equity equally between the traders you choose rather than give most of it to one and almost none to the other experts!

3) Management:

Once you’ve decided which traders to copy, as many as twenty at any given time, you will need to manage your people-based portfolio. Traders analyse financial trends, you analyse the traders.

The analysis should consist of observing a trader’s performance over the previous month keeping an eye for any downward trend. A consistent downward trend means stop copying. Traders should know when to trade, you should know when to stop copying.

Check the trader's quity for the past month. If his blue line is going downwards, it's time to stop copying.

The key statistics listed on the right-hand side of the trader’s profile’s main page including gain (equity gained in the past thirty days), profitable weeks (the ratio of weeks over the last thirty days in which the trader’s total equity at the end of the week is higher than the total equity at the beginning of the week), Max Weekly Drawdown (the highest weekly decrease in total equity over the past thirty days - the smaller this number is, the better the trader is at managing exposure and risk).

The importance of the compounding effect

The Trader in Pajamas system will not make anyone rich overnight. The “promise” was to make anyone gain a monthly income from home.

The maths: $1,000 initial investment with an average monthly yield of 15% is hardly monthly income but in one year it will become $5,350.25, in two years $28,625.18. By following this system consistently, the initial investment would eventually turn into almost half a million dollars in five years, at which point your monthly profits would amount to between $50,000 and $60,000.

If the initial investment is supplemented monthly by even a small amount, say $200, the difference in both the annual and monthly income would be even in the area of hundreds of thousands.

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