I haven’t traded as a leader or follower on any social trading platform but I’m considering it.
Before I even start, I have noticed a potential problem and I am wondering how other traders deal with it.
Firstly, if I was the kind of a trader that placed one trade and waited until it came to profit or hit a stop loss and exited it, then there would be no problem.
However, if you are the kind of a trader that martingales or builds up a trade (no anti martingale advice please. It’s a separate discussion), then your trades are ongoing. There might be one or two or a hundred entries for that matter. There maybe hedged positions, graduated volume entries, 3 way or more trade combinations etc. in order to achieve that profit we are all after.
So, what happens if a trader joins in after the trade has been initiated? What if a new follower joins in on the tail end of the trades and his single or few trades he copied get cleared not because they were in profit particularly but they were only items of a string of previously planned and executed trades?
Anyone has faced this problem? Any solutions? I asked the rep from one such a broker and he basically said trading strategies and how they evolve is not their problem. If I was to start a social trading site, I’d think that would be a problem and I would need to contend with but no, not them brokers. They just see this as a way to make more money.
My only solution is to write a disclaimer explaining the problem and leaving it up to the follower to deal with entering midstream. I looked around at some leader traders and I did not see anyone mentioning anything about this. If someone accepts to enter, then maybe there will be losses for the first week or two until things settle down and then they will be getting on with all trades but as we know, people are impatient and will judge you based on their first impression and then they will leave and write a nasty comment on you and rate you you low. I guess the social trading platforms don’t give a hoot about this sort of thing.
Inputs, suggestions, links to other threads regarding this etc. would be appreciated.
Also, any opinion about the legality of social trading would be useful. Social trading is like providing a suggestion to enter a trade especially if you get paid for it. Social trading is like in a way trading someone else’s money. Does anyone know of any objections or approvals of the regulatory agencies about this?