Forex Social Trading: The Good, the Bad, and the Not so Good

For the past few months, I have been running an in-depth experiment on social trading. I have made a few pips here and there, and some losses too. But the greatest thing is that I have learned a lot that I didn’t know.

forex social trading

Social trading is what happens when you combine elements of social media with forex trading. It allows new traders to observe, learn, and copy trades of the most successful traders on a platform.

A few forex companies (such as etoro and Zulutrade) have integrated social trading in their platforms. In return, they have reported a spike in the number new client acquisition and retention. This is because Social trading features keep clients engaged. Imagine trading on a platform that allows you to see what other traders are buying or selling? Would you ever want to leave?

A look at data obtained from Leverate, another popular social trading platform, reveals that social trading significantly reduces the learning curve for beginners and increases their profitability.

In fact, Ronald Mwiti, who was one of our forex training students, advanced to the list of top forex traders on etoro by copying what other traders were doing.

Personally, I first heard of social trading a few years ago, but I never paid that much attention to it.

Why?

Because I have always wanted to do all the hard research and market analysis for myself. That way, if something went wrong with any of my trades, I would only have myself to hold responsible.

Then, I was doing so well using a foolproof trading system that I developed. I was doing so well that I thought I could give myself some time off to indulge in an expensive hobby.

And what other better hobby beats being in social media. Etoro has been referred as the Facebook of Forex Trading, and whoever gave the platform that name was right on point.

So, What is Social Trading?

Social trading is an approach to forex trading that allows you to see and copy what other traders are doing.

Traditionally, successful traders guarded their positions and trading strategies fiercely. In fact, way before the advent of the internet, only a few individuals knew about online forex.

When online trading was popularised a few years ago, the only way you could trade forex was through fundamental or technical analysis. Although there is nothing wrong with technical and fundamental analysis, they are both complicated strategies that confuse most new traders.

But things have gradually changed over the past few years.

forex social trading

The world has slowly but surely become a small village. Social networks have made communicating with friends, relatives, and strangers just a click or a tap away.

You can think of social trading and social forex as the biggest leap in social media for traders.

Such trading combines aspect of social media such as updates, following, and friending, with the core aspects of forex. Unlike with technical or fundamental analysis, trading decisions are crowdsourced within the community.

In social trading, information is generated by other users on the platform, therefore removing the need for newbies to learn complicated analyses strategies. And just like in social media, information is shared in real time, allowing new investors to watch and replicate the trading decisions of experts.

How Does it Work?

To help you understand social trading better, let us take a hypothetical example of what would happen on social media, say Facebook.

If you learn from a Facebook friend of yours that a company is about to release or acquire a new startup, this is certainly bound to skyrocket the shares of that company, which means that the best time to get in on the stock is now.

social trading forex kenya

Still on Facebook, another friend mentions a managerial conflict is brewing in another company. This will certainly dip the shares of the company. If you had bought their shares, you’ll most probably want to dump them now.

I hope you get the picture.

But what you get on Facebook might not be reliable. And Facebook is not specialised for such information.

Now, imagine being on a platform that only shares information on forex trading, in real time?

But the beauty of social trading sites lies not only in the information provided, but also in the fact that you can see the historical trading data of the person providing the information. You can therefore tell how reliable they are.

You can get information on different other places such as Google+, Twitter, forex forums or from a premium forex signal service, but there is no way to prove the legitimacy of such information.

I’d therefore recommend you to use social trading sites, if you intend to trade using third-party generated information.

Getting Started With Social Trading

Sign up on a social trading platform

You’ll need to sign up on a social trading platform. There are quite a number of them that have sprout up in the past few years. However, the most popular and reliable ones included

  1. Etoro
  2. ZuluTrade
  3. Ayondo
  4. Tradeo,
  5. and Copyop.

Following a trader

Once you have signed up in a social trading platform, take time to explore through the different expert profiles on the platform.

If you find a trader that pleases you, and is constantly profitable, you can choose to follow him or her.

This way, you’ll see his trades, comments, and more of his activity at all times. Following an expert helps you learn from him, and if you do not understand what he is saying, you can always ask him to clarify for you.

There is a lot that goes into choosing a trader to follow. However, I’d recommend that you follow a trader who communicates with the community on the platform. By doing this, you’ll be able to learn a lot faster than you’d otherwise do.

Of course, if the community is a large one like the one in etoro, the trader might not be able to answer all the questions and comments. Don’t act like an entitled aristocrat.

Private Messaging

A truly social trading platform puts social interaction features upfront. Many of the social trading platforms that I mentioned above allow users to exchange messages via a private inboxes.

The social features mirror those of Facebook, Twitter, and LinkedIn.

Make use of these social features. There is a reason why they are there. Ask questions where you don’t understand. Like with any other social media platform, the more you are active in there, the more you’ll gain. In short, don’t be an introvert.

Can you make money with social trading?

It is good to be sceptical, especially where money is involved. So, how plausible is it for a beginner trader with zero experience in trading to register on a social trading platform, and make money from just copying other traders?

Yes. Social trading increases your chances of profitability. You’ll be more positioned to make money with social trading than with conventional trading.

However, while social trading is fairly easy to implement, it is not without its drawbacks.

  1. Many of the social trading platforms will allow anyone to become a ‘leader’ and have their trades available for others to copy. So, how do you choose the leader to follow? This is a topic for another day, but in essence, you want to copy traders who have a history of successful trading.
  2. Social trading fosters a culture of laziness and lack of responsibility. To become a successful investor in any market, you have to

Would you like to try a trading on a social trading platform? Open a demo account on etoro.

Breakout Identified in EURUSD

Signal ID: 42290
Time Issued: Monday, 08 February 2016 16:12:15 GMT
Status: open
Entry: 1.11577 – 1.12034
Limit: 1.12685
Stop Loss: 1.10856

The Breakout Opportunities system has just bought EURUSD at 1.11817.

The system recommends entering this trade at any price between 1.11577 and 1.12034. The signal was issued because the EURUSD has broken its 24-hour high while our Speculative Sentiment Index was at -1.6938, suggesting that the EURUSD may have further to rise.

A stop loss has been set at the 24-hour low of 1.10856 and a profit target has been set at the 1 Day ATR level at 1.12685. The system will move the stop to the next 24-hour low every time that 24-hour low is higher than the previous 24-hour low.

Breakout Opportunities is a breakout strategy that aims to catch the significant moves that typically happen when currencies break through technical support or resistance. The SSI Breakout strategy tends to work well in volatile market conditions.

Is Forex Trading Worth it? Top 7 Questions About Online Forex Trading

Is investing in online forex trading worth it? This is one of the most common questions we get asked by fellow Kenyans who want to invest in the forex market, but they are not sure whether it is worth it or not.

There are a few other common questions that we get asked now and then. So, in addition to answering whether investing in forex is worth it, we will also be looking at the other 6 commonly asked questions.

But first things first:

Is Investing in Forex Trading Worth It?

When new traders are asking this question, they actually have a number of questions vested in one:

  1. Should I spend time learning how to trade the forex market?
  2. Is online forex trading a promising venture, or is it a waste of time and money?
  3. Can one become wealthy (read millionaire) by trading forex?

These are all worthy questions. You really need to know what you are getting into before you start trading. You need to know whether it is worth to spend your time and money learning how to trade forex or whether you should look for another means of investment.

[easy-tweet tweet=”Is investing in online forex trading really worth it?” user=”kenyaforexfirm” hashtags=”#KenyaForexFirm”]

If you are asking this question, you probably fall into one of two categories of Kenyans:

  • You know that you can make money trading forex. You have seen your friends or family become rich by simply investing in forex. But you have doubts as to whether you can personally do it.

The short answer here is simple. If others can do it, you also can. You don’t have to be a genius or have high academic qualifications. You only need to be dedicated, disciplined, and serious.

  • The second category consists of those who have a slight clue that they can make money trading forex, but they don’t know just how much they can rake in. They probably don’t have anyone they can look up to who’s been trading forex successfully.

If you fall under this category, you probably have a few comparisons to make, and you are looking for an investment that will give you the highest return on investment in the shortest time possible.

I like to use the example of a doctor while explaining this. If you are to become a doctor, which is one of the highest paying jobs in Kenya, you’ll need to spend at least 7 years learning. After you’ve graduated, your starting salary would be around 500,000/=, and that is if you are highly specialized. To earn this much, you’ll also be required to put in at least 8 hours of work per day.

Average high school teachers in Kenya make about 60K per month. Bank tellers make about 30K per month, and a janitor will take in at most 20K at the end of the month.

Now, let us look at how much you can make as a forex trader.

The earnings of forex traders in Kenya vary greatly. Each trader’s earning will depend on factors such as their trading style and their account size. However, once one learns how to trade forex and starts trading profitably, there will be no limit to the amount of money they can make per month.

Say for instance, you open a forex trading account with a deposit of $2000 (200,000 KSh), and you consistently make a profit of 20% per month. After three years, this account will have grown to $1,417,603.75 (that’s more than 141 Million Kenya Shillings!)

If you start withdrawing your monthly profits after your account has grown this much, you’ll have yourself a month income of $283,520.75 (Ksh 28,352,075- yes, that is 28 million Kenya Shillings.)  A lot of forex traders in Kenya have been able to achieve this, and so can you.

But Can You Really Make 20% Per Month?

I am going to tell you something that I always avoid saying. The way most forex traders trade, making 20% per month is a piece of cake. I don’t usually say this, lest I be accused of misleading people. But the truth is, you can make more than 20% per month trading online forex.

[easy-tweet tweet=”You can make 20% per month trading forex” user=”demagnify” hashtags=”#KenyaForexFirm”]

So, Is Forex Trading Worth It?

Compared to other jobs, an investment in forex trading is a worthy investment. It has less hassles, stress, and risk. Once you become a profitable forex trader, all you have to do is check a few charts per day. You’ll literally be spending less than 60 minutes on your computer per day, and making more than you’d have made on an 8-5 job.

Risk Disclaimer

It’d be imprudent for us to end this article without a risk disclaimer. Forex Trading is profitable, yes, but if you do not follow the right track, it is also the easiest and fastest way to burn your money. You can lose a lot of money in this business. You can even lose all that you have- I’ve seen this happen to a few fellow Kenya traders.

Don’t rush after wealth and riches. Aim to understand the ins and outs of the market first, and everything else shall follow. If you liked this article, kindly share and comment.

 

 

Can Robots Make Money?

The past few months have seen a spike in the number of international forexpreneurs who are holding workshops in Kenya. First there was Gregg, and then there is Edward, who is set to hold a free one-day forex training workshop on January 30, in Nairobi.

While some of these forex mentors have a genuine need to help emerging traders get off their feet, most are only looking to generate sales for their expensive forex trading software and robots, which brings me to the question, Can robots make money in the forex market?

What are Forex Robots?

We don’t want to run ahead of ourselves. If you are new to the forex market, you must wonder what forex robots are? Are they a set of cybernetic humanoids that you buy and place at your desk to monitor, analyze, and place trades for you?

No. They are not even close to that. A forex robot is a software. A software that has been programmed with instructions on what to do if certain conditions are met or are not met.

These software are designed to monitor, analyze, and actually open and close trades on your behalf.

Do they work?

Hundreds of forex robots aka Expert Advisors are released into the market every month, and as if that was not enough developers are at work creating more. Some are free. Others will cost you the price of opening a Standard Forex Trading account with one of the prime time forex brokers. Each one of the forex robots claim to be better than the others. It is a wild, wild world, if you ask me.

It is utterly confusing for a new forex trader to choose one over the other. Usually, newbies will end up buying more than one software, and hope to sit back, relax, and watch their trading accounts grow astronomically.

But they are usually disappointed.

The forex software does not perform as well as the vendor said it would perform. It is actually losing more trades than you’d lose trading manually!

It does not take long for the newbie to realize that they’ve been taken for a ride! If s/he is critical enough, they will realize that more money is made selling the forex robot than the robots are making. After a while, the trader starts wondering whether there are any forex robots that can actually make money, and if there is one, where do they find it?

What’s Our Stand?

We believe that some robots can make money in the forex market, some of the time. There are few critical factors to consider if you want to go the robots way.

Some robots will be released into the market with a lot of fanfare. However, their performance starts to dwindle as the market changes. Look for a software that is periodically updated. Don’t get shy to ask the vendor how often their fancy forex robots are updated.

However, regardless of how good a forex robot is, you cannot leave your trading station unmanned.

Have you had experience trading forex with EA’s? What’s your opinion about automated trading? Kindly leave a comment.

Understanding the Basics of Fundamental Analysis in Forex

Forex traders in Kenya, and elsewhere in the world, approach the forex market from two broad perspectives: either through technical analysis or through fundamental analysis. As a beginner, you may spend a lot of time trying to figure out which is the best approach to trading. The truth of the matter is that none is better than the other.

History is full of traders who have made bank by employing any of the above approaches.

In his book, Market Wizards, Jack Schwarger interviews two prominent traders, Ed Seykota and Jim Rogers. Rogers is a diehard fundamental trader who believes that no one can make a living trading forex using technical analysis. He goes ahead to say that he has, in fact, never met a rich technical trader.

Seykota shares the opposite view. According to Seykota, he had always been a poor trader when he relied in fundamental analysis. He insists that his fortune changed when he switched to technical trading.

As stated earlier, none is better than the other. You only need an approach that suits you, stick to it and make bank.

In this article, I am going to disect the basics of fundamental trading, just in case you decide that you decide you want to be a fundamental trader.

What is Fundamental Analysis?

Fundamental analysis is a way of studying a security in order to deternine its intrinsic value by analyzing a host of financial data.

In the forex exchange market, a security would be a currency. Fundamental analysts are always analyzing emerging financial data from a country in order to determine the value of the country’s currency.

There are several important economic indicators that every fundamental forex trader should understand. Fluctuations and variatons in these data will make the currecy value of a country to fall or rise.

Interest Rates

Interest rates are the most important driving force of the value of a country’s currency. Most central banks announce the interests rates every single month. Fundamental traders keenly watch these announcements to decide how a currency will be affected.

In general, Central Banks will manipulate the interest rates in order to control the amount of money in circulation. If the Central Bank wants to increase the amount of money in circulation, it lowers the interests, and conversely increases the interest rates when it wants to decrease the supply of its currency in the economy.

Gross Domestic Product (GDP)

GDP is the indicator of how fast a country’s economy is growing. Every country’s Central Bank has expectations of how much the economy is expected to grow every year. When the Gross Domestic Product falls below this expectation, currency values tend to sink while a growth that hits the expected growth rates or goes above raises the value of the currency.

Inflation

Inflation destroys the purchasing power of a country’s currency, and therefore tends to devalue the currency. It is generally expected that a currency will suffer inflation of 2-3% annually. However, if the inflation rises beyond the Central Bank’s expectations, the Central Bank will increase the interest rates on the currency.

Unemployment

Without people, we wouldn’t have any economic growth. Employment and unemployment are the backbone of every country’s economic growth. When the level of unemployment in a country rises, it tends to have a devastating effects on the economy. To minimize the effects of unemployment on the economy, the Central Banks will reduce the interest rates in an attempt to increase the supply of money in the economy and stimulate economic growth.

Consumer Demand

As we have already stated, people are the ones that drive economic growth. Healthy consumer demand lies at the center of economic growth. When consumers are able to demand goods and services, the economy tends to grow. When the consumers’ demanding power is decreased, the economy tends to stagnate.