Trading on the foreign exchange market can be viewed as a solitary experience which can lead to feelings of loneliness. However, there are various social networks that allow traders to connect with others. This not only provides them with opportunities to share ideas but also to chat about forex experiences. New traders are advised to join these sites as they offer a wealth of information which may not be found in traditional online education resources. Yet, as with all things there are drawbacks in addition to advantages. When looking at these social networking sites you must be aware of these drawbacks as they may affect your trading.
Trading on shared information
When forex traders meet there is generally a sharing of information. This information may be about any topic within the forex scope including different trends in the market or new trading software available to purchase. While the data can be beneficial, especially for new traders, you must approach this shared information with a degree of caution.
While shared information is able to ‘open your mind’ to new forex opportunities and perhaps assist with a problem you have had a mental block against, it can sometimes lead you in a damaging direction. Not all information found on these networking sites is useful and you should not trade on data found in this situation. If it goes against you trading style or you are not sure how to use it correctly it is best to avoid using it at all.
Being a forex follower
When on a social trading network you discover various forex trader personalities. One common personality is that of the ‘know it all’ who will share stories of his/her experiences constantly. This information can be very helpful if you use the data effectively. However, you should not follow the stories of this trader as both their trading strategy and market conditions were different. Unless you experience the exact same market movements and use the exact same strategy the chances of profit are highly unlikely.
New traders may be tempted to follow an experienced trading process step-by-step, especially if that trader is a successful one. This is a bad idea as the risks of losses are greatly increased. Each trader is unique with their own trading style and it is best to incorporate their guidelines into your trading strategy in order to be profitable.
There is one time when a new trader should consider following another trader. This is when they are predicating market trends based on factual information. This is an actually a type of trading strategy where the trader follows the crowd to follow a trend. It is based on the idea that if enough traders are following one trend then that trend should be worth following. However, the trade you position must be based on a personal interpretation of the trend data.
Gathering foreign exchange market news
Many traders on the forex social networks will post different pieces of global news. This is done as the news items have a direct effect on the foreign exchange market and thus on their trading. Once this news item has been posted traders will discuss it and how they feel it will affect market movements. It is highly beneficial to be on the social networking site during these moments as you can gain insight from experienced traders.