Social trading, a new trend in the financial world, promotes inclusion and education for investors. Not everybody, however, is poised to benefit.
“Together we do better” – that's the motto of online social trading. Anyone looking to become an amateur trader, however, should not compare the malleable rules of social trading with those of an established bank.
The principle: A participant or trader keeps a sample portfolio and publicises it on online platforms. The better the portfolio develops, the higher it climbs in the corresponding rankings.
This allows others to see the trader’s best practices and follow suit. Other investors can follow the investor and even copy his or her decisions. It’s a way to promote inclusion and learning within the trading world, but it doesn't always lead to success for every investor.
While some traders are quite successful, social traders can use strategies that are not necessarily consistent with an investors' needs, investment objectives and risk awareness. Be prepared for losses, if the risks are high.
At the same time, social trading is not subject to the strict rules that apply when consulting in a bank. Declarations of suitability, the examination of whether the financial product is viable for the investor, the recording of possible consultations and the disclosure of costs generally do not take place. — dpa
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