You may hear people saying that trading is just about you, your trading strategy, your orders, and your money. For the most part, they would be right, especially when it comes to the money, but there is a way to entrust the trading itself to someone else, both in the form of your or another trading strategy.
What is this exactly and why should you (not) do it?
Your strategy, someone else’s orders
Let’s say you are in a situation in which you have a good trading strategy, but you are not doing so well in real trading. You manage to find that the problem is in your psyche and in a non-compliance of your trading strategies. Of course, you should work on these issues, but there is a possibility to automate the trade in the form of an AOS – automatic trading system.
If you have a strategy based on technical analysis, AOS is a great solution for you. The well-known MetaTrader has a feature for creating AOS that is able to trade for you according to your parameters.
If it is too difficult for you to automate the strategy, you can pay someone more experienced to prepare the AOS for you. Then you just apply your strategy and the trades will be realized on their own.
The other option is a broker who would be willing to trade with your trading strategy for you. There are not many of them these days, and in many cases the broker would work with the same automation, meaning he would accept your strategy, then let it be rewritten into an automatic strategy and then would release it. Thus, there is no person who would actually trade your strategy, as everything is done by a computer. If your trading strategy is specific and cannot be automated, you would have to convince the broker with an interesting volume of deals.
If you have a purely technical strategy, you can try to automate it by yourself, possibly with the help of more experienced brokers or “programmers.” It is also suitable for experienced traders who have no problem with their emotions. It is necessary to mention that the result may not always be the realization of the trade, but perhaps just a warning in a form of a pop-up window “On XY a signal according to the trading strategy was created .” Consequently, it is up to you whether you use this information or not.
Copying trading orders
You have certainly encountered brokers with the ability to copy trading orders. These brokers include eToro, Purple Trading, and several others. These brokers offer you the possibility of social trading, in other words, trading based on someone else’s trading strategy. Theoretically, this is basically copying of trading orders of an automated trading system. Actually, it’s quite common.
We have now gotten away from trading to speculations and investments. In this case, we might get into a minor collision with the terminology. Even in trading, you will encounter terms such as speculation or investment (investment is in long-term trading), but what we have in mind now is an investment of general importance, in which you are actually investing money in a project and speculating on its valorization.
In this case, you do not have the result firmly in your hands, as you are forced to rely on someone else’s orders and actually speculate on the basis of the results of others. This has not much in common with trading alone, but again it depends on how you look at it. Here, too, you can filter out good traders and let their trades be pointed out. If they match your idea, then you can trade manually, if you choose to do so. In this manner, social trading can serve as a kind of filter for your trading.
Personally, I do not damn copying trading orders, automated trading systems (AOS) or other types of automatic investments, as they always depend on many circumstances. As I like to say, not only trading but also life is all about common sense. And if the given situation makes sense to you and fits into your trading plan (investment, security, diversification…), use it. Social trading and copying trading orders is not a fraud, but it is no longer trading in its original sense. Even so, we must take this method seriously and consider it another investment option.