Gurus secrets revealed: Observing the habits of highly successful Social Traders

It may have taken a while for retail trading providers to latch on to the social network phenomenon so prevalent nowadays in most other online activities, but now that they have, social trading is taking the retail forex world by storm. Recent statistics from the eToro OpenBook social investment network show that traders not only prefer to carry out their trading activities through the social medium (over 70% of all trades), but that the medium itself is radically changing trading habits and efficacy. A dramatic 20% improvement in overall trader performance figures since the launch of the network, shows that the newly introduced social aspect of trading is not only a much needed injection of fun into the field, but a veritable revolution in the retail FX industry.

First Published: e-Forex Magazine 46 / Sponsored Statement / January, 2012

The more practical applications of social trading are manifested in OpenBook’s CopyTrader function, a feature enabling traders to automatically copy the trading activities of any other OpenBook member. Such a function brings with it a world of possibilities such as people-based trading portfolios, second incomes for Guru traders, and a drastic trickle-down effect for performance improvement across the network. Not only is the success of one Guru trader is automatically translated into the success of thousands of followers, but these followers can learn to become Gurus themselves by picking up effective strategies and even getting in touch with the experts directly through discussion boards.

So how does one become a social trading Guru? We’ve asked eToro OpenBook’s top ranked Gurus to share with us some of the secrets of their success.

eToro makes finding best performing traders easy with a simple
ranking page based on Gains, Win ratio and Copiers.
eToro makes finding best performing traders easy with a simple ranking page based on Gains, Win ratio and Copiers.

Diversity isn’t everything

Although every single trading course and manual will tell you to diversify your portfolio, a quick glance at the most profitable traders on OpenBook will show you that most of them dedicate a large portion of their funds to trading just one or two instruments. For example, the top earner for 2011, NMarijus of Lithuania, earned an incredible 1440% return over 6 months by trading EUR/USD almost exclusively. A survey of the top OpenBook Gurus revealed that not only do they tend to stick to one currency or commodity, but many also prefer to trade the currency of their region. The reason for this, according to clickrate from Australia, is that traders are able to follow their own currency more closely, to be more aware of the various economic factors that affect the currency, and therefore to be more in tune with the market. 

From the social and copy-trading angle, Gurus with narrow focus present a good copying candidate because they are easier to keep track of and less likely to clash with other traders in a well diversified copy-trading portfolio. 

eToro’s HTML5 native application is available on iPhone and android
eToro’s HTML5 native application is available on iPhone and android

A little leverage can go a long way

Leverage is the great equalizer that makes retail FX trading possible, enabling people to invest in and profit from the market without huge amounts of capital. However, leverage is a fickle friend that can quickly turn into a foe if you use too much of it. When we look at all the OpenBook Guru profiles, all the top earning traders without exception use mostly low to medium leverage, that is from 1:2 to 1:100. A majority of the eToro Gurus said that they preferred to stay away from the risk of high leverage all together, while the few exceptions admitted that they used high leverage only very rarely, in instances of a steep short term trend. And even they recommended to resist the temptation to do so. Using lower leverages enables eToro Gurus to take advantages of longer trends and yield higher profits by making their positions less vulnerable to unpredictable market swings. 

Don’t forget that copying traders that use high leverages means putting your own portfolio at risk as well. You can avoid the extra risk by sorting the OpenBook rankings and live trading activity feeds by risk level. 

See. Follow. Copy. 

If you think that Gurus are higher beings that have no interest in other mere mortals think again. All of the eToro Gurus make sure to keep in touch with the rest of the OpenBook community by observing live feeds, following other traders, and even copying each other. The social trading network enables our single minded experts to diversify their portfolios by copying other Gurus who are experts in trading other instruments. 

It also enables them to keep up with the latest news, trends, and to open up discussions about the financial markets. Even for an expert, there is no upside to trading in isolation, since the social network is a good reflection of investor sentiment. By trading in a community, the eToro Gurus can keep fine tuning their trading skills. 

To start your journey towards becoming a forex Guru, visit www.etoro.com for more details about the eToro OpenBook social trading network.