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Ayondo Trading Review

Ayondo is a limited company based in the UK and has been in operation since 2009. It is quickly becoming one of the leading social trading platform in Europe. Their mission is to ‘revolutionize the retail trading and investment space’. We decided to check out how well they are doing in achieving their mission.

Organization and regulations

Understanding the organization of the company you are about to entrust your money with is obviously a prerequisite for every prudent investor. We decided to look at Ayondo’s corporate organization first.

We found that the social trading services are provided by Ayondo GmbH, a company registered in Germany. Ayondo Markets Limited, registered in England and Wales on the other hand, provides the trade execution service. The latter is the sole provider of the brokerage services. This means that you are not able to choose other brokers when you sign up with Ayondo and that you have to use their brokerage services.

The liability for Ayondo GmbH is covered by DonauCapital Wertpapier AG, which is regulated in Germany by the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin).  As for Ayondo Markets Limited in the UK, it is regulated by the Financial Conduct Authority (FCA).

Ayondo Markets Limited has been in operation in the UK since 1997. The social trading services have up-to-date, been around for five years. As of the writing of this review (May 2014), we did not find any complaints lodged against the company in the FCA records. So, as far as regulations in the Europe goes, Ayondo has a clean report. We did note however, that Ayondo is not regulated in the US and it does not accept US residents.

Demo accounts

Like most other service providers, Ayondo allows you to open a demo trading account to test out their platform. The demo account is valid for 15 days. It comes preloaded with $100,000 and nearly all the features are available in the live account. Opening the demo account is a straightforward process. We did notice however, that the list of countries available is not complete. The dropdown list where you choose your country of origin is not exhaustive and no explanation for this is given.

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Tradehub: Ayondo’s White Label Trading Platform

Be ready to be patient while opening the account, as it may take a while ( meaning a day or so). In our case, it took an unbelievable twelve hours for the confirmation email to reach our inbox. Clearly, Ayondo could do much better in this area.

Signals providers

Ayondo allows their ‘top traders’ to act as trade signal providers.  You will be pleased to know that the number of signal providers available is now over 1000. That is a lot to choose from and it can be quite overwhelming at first. Ayondo provides a brilliantly intuitive interface to find your perfect ‘top trader’. You can sort them out according to their profits (or losses), number of  followers, maximum draw down, trades per month and the volatility of trades.

Ayondo does not allow top traders to publish their strategies. They want traders to be gauged on their actual performances. So if you are looking to find out how your favorite trader takes his trades or their strategies, you will be saddened to know that Ayondo discourages this form of ‘advertisement’. Even though this forces you, the investor, to be objective in making your investment decisions, we feel that it does very little in the way of encouraging ‘social trading’. With that said, it is somewhat difficult to blame Ayondo for taking such measures. There are many strategies out there that may seem great on paper but may eventually burn holes in your wallet. Besides, there is no guarantee that the trader will stick to the strategy that they proclaim to follow. Judging ‘top traders’ solely based on their performance is a much more desirable way to go about it.

Ayondo provides a portfolio cconfiguration page where you get to add or remove traders from your portfolio. You are able to follow up to five traders. Adding traders is a simple matter of drag-and-drop. You will find it very simple to use. Expect to get a warning every time you try to add a ‘street trader’ to your portfolio. At the time of this review though, the top performer was at a street trader level with a massive 38.54% maximum draw down. From this page, you are able to control the factor by which trades from each trader is copied proportionally to your account using a simple sliding ruler.

The interface also comes with a very usable search capability. You can easily filter the results to show just the traders that meet your preferred criteria. When it comes to finding the ‘top traders’ in Ayondo, the interface is really very well designed.

So, now that you have selected your ‘top trader,’ what next? You can go to his profile and see detailed report of his performance. The trader’s performance information is displayed in six categories.  The first thing you will notice is that at the very top is a summary of his performance (percentage since registration, maximum draw down, volatility of returns, number of trades, percentage of wining trades and percentage of past winning months).

There is a graph to show how the trader’s equity has fluctuated since they registered. We were happy to note that you could view all the transaction history of a trader even though it is not possible to download this data offline. For some investors, the ability to analyze the data offsite is important; they will find this disappointing.

‘Top traders’ can send signals from demo or live accounts. It is easy to find traders that are using ‘real money,’ they have huge noticeable ‘R’ badge on their profiles. There is comfort in getting your signals from a trader who has their own money at stake as compared to one trading with virtual money. Making it easy for us to find the ‘real money traders’ is certainly welcome.

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Ayondo’s detailed search function. You can filter the users that show up in your search.

In Ayondo, there are five levels that a ‘top trader’ (signals provider) can fall starting from a ‘street trader’ level and all the way to the ‘institutional’ level. Anyone can become a ‘top trader’, however there are criterias that must be fulfilled to join even the lowest level as a street trader. Here is a breakdown of the requirements that must be fulfilled for each level.

  1. Street trader level requires the trader to have completed a minimum of 15 trades in 30 days and their maximum draw down must be below 25.0% and finally thereafter 30 days, it must be over 1.0%.
  2. Advanced level  requires a minimum of 15 completed trades in 60 days with a minimum of one trade each month and a maximum draw down of less than 25.0%. On top of this, the performance must be at least 2.0% since the start of their career
  3. Professional level requires a minimum of 25 completed trades in 90 days with at least one trade every 30 days and a maximum draw down not bigger than 20.0%. On top of this, with a performance of at least 4.0% since the start of their career.
  4. Risk-adjusted level requires a minimum of 50 completed trades in 180 days with at least one trade each month and a maximum draw down of less than 15.0%. On top of this, with a performance of 6.0% or more since the start of their career.
  5. Institutional level requires a trader to complete at least 150 trades a year with at least one trade each month. Their maximum draw down cannot be larger than 15.0% and their yearly performance must be a minimum 8.0%. Key data for institutional level trader is continuously monitored.

The ‘top traders’ compensation is based on the level they are in. Institutional traders get the highest compensation while street traders get the least among the levels. Because attaining a higher level, depends on the risk a trader takes on and not just his profits. The system is designed in such a way that a trader is motivated to take less risks and trade professionally in order to get higher compensation per trade.

Live accounts

Opening a live account with Ayondo is a straightforward process. It costs only 100 Euros to join. To fund your account, Ayondo accepts bank transfers, credit card funding and skrill payments. You will need to send certified copies of your identification documents together with the standard signed documents. In most countries, a notary public will suffice to certify your documents as ‘true copies of the original’.

Live accounts come with a live feed from Reuters, which in demo accounts; is delayed for 15 minutes (in trading terms 15 minutes is like a decade).

The trade execution is smooth. At the time of testing, we noticed no slippage, which is desirable for copy trading. The spread was about 1.5 pips on the EURUSD. Obviously, this cannot be compared to ECN spreads but it is one of the best available for social trading. In addition, the fact that your trades and those of your signals provider are executed by the same broker reduces lag time, which saves you precious pips.

One of the most impressive things about Ayondo is the interface. It has a clean, no-cluttered design. You will notice that it is very intuitive from the moment you log in. As we had mentioned, it has a useful drag-and-drop functionality for adding traders to your portfolio, which we are sure that you will enjoy using.

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You can control the factor by which trades are copied to account.

Trades from the ‘top traders’ are copied to your account proportionally with your account size. A nice feature is that you can adjust the risk setting for each trader individually. If you notice that one trader is making more losses on a particular instrument, you are able to tweak the order factor of that individual instrument for that specific trader. This enables you to optimize your returns and reduce your exposure to specific non-performing trades. We must say that it is a very impressive feature for risk management.

Another risk management option available for live accounts is the loss protection option. It works like an account stop loss. It allows you to predetermine the amount of loss you would let yourself suffer before you stop trading.

You will be able withdraw a minimum of £10. To withdraw your money from Ayondo, you can use your debit or credit card with no processing fee though it will take a minimum of 5 working days. You can also opt for a bank transfer which is free for UK banks and up to £15 for transfers outside the UK. Processing time will be between 3 to 5 working days. You can also use the CHAPS transfer for a charge of between £16 and £26. This option is only available in the UK.

Community and support

An immersive social trading platform ought to support social features that allow interaction among traders and followers. Unfortunately in this area, Ayondo does poorly. There is no way to interact with ‘top traders’. Some top traders do not even have uploaded profile pictures. In fact, apart from the impersonal charts, graphs and statistics provided, you will know very little about the person you are following. There is also no way for investors to interact with each other.

We also did not find any educational or training material on trading; which is disappointing for novice traders.  There is a blog though, with a few trading articles. It does not seem to be regularly updated and we doubt if anyone will find it actually useful.

Support

Customer support is only available on the weekends during business hours. Trying to get support email was surprisingly frustrating. For instance, it took ten hours to get a reply from email support about opening an account. The confirmation email for the opening of a demo account also took ten hours. If you need to get emergency support from Ayondo at odd hours, you will be very disappointed.

Ayondo Tips and Tricks

In order to be great in social trading at Ayondo, it is important that you decide from the first moment you start participating that you will aim to be the best at it. Having this goal allows you to operate at a certain level of excellence that is above what other followers will ever get. The wonderful thing about social trading is that as an investor; the skill set required for you to succeed is easy to attain.

However, this demands a very high level of discipline and critical thinking. In this guide, we will look at the tips and tricks that successful social traders use in order to get the results that they want. By following these guidelines, you will set yourself apart from other followers and you will increase your probability of success several times over and you will be able to make better decisions in your social trading investments.

Set your own goals

Here at Social Trading Secrets, we will tell you as plainly as possible what works and what does not. Therefore, we hope that you will choose to practice what works. Here is one practice that works for all investors in all fields. Start with your goals in mind!

There is a reason why we put so much emphasis on this simple step. Most people who get into social trading, overlook it or assume that it is impossible to have specific goals for social trading and to realize them. It is not.

Not having social trading goals is a very poor strategy for making money in this field. You should at least know what you are doing, why and what you want to achieve in the long run. By simply knowing this three things, you will be in a better position to know when your methods are working and when they are not. You will have an objective standard to gauge your own performance as an investor.

Here are some questions you ought to answer when setting up your goals.

ü      What is the return on investment that I want to make quarterly?

ü      Which traders can help me get this sort of returns?

ü      How much risk am I willing to take on?

ü      Which traders will fit into my risk profile?

ü      What amount of time will I set aside to monitor and follow up on my social trading activities?

ü      How will I monitor my traders?

ü      How will I find and screen traders who can help me meet my goals?

ü      How will I know when a trader can no longer help me meet my goals?

ü      How much initial investment will I make with Ayondo?

When you answer these questions, you are ready to come up with proper goals. Take time and consider each question and note down your answers.

Rely on your own analysis

We already know that social trading is a great way to invest for those who cannot do the actual trading for themselves. However, as a successful investor in the social trading realm; you need to be keen and diligent with how you allocate your money. The secret of social trading is taking responsibility for your own success.

There are too many people who choose not to do their own analysis and rely on the analysis of others. This is probably the worst strategy for engaging yourself in social trading. Unlike some other areas in life, money does not follow the majority. Money is not democratic; simply because a trader has many followers, does not automatically mean that they will be the most successful. This is the first lesson in social trading. Do not follow a trader simply because they have a huge number of followers. Follow him if he fully meets your criteria of an ideal top trader.

Here is a checklist of the things that will enable you to be more confident in following your own analysis and sticking to it.

ü      Ensure that you are actually competent to analyze traders and allocate capital to them in a smart way. To do this, first check out the point below on ‘becoming a competent investor’. Also read and faithfully apply the tips in the ‘Ayondo Social Trader’s Tips’. Those tips deal specifically on the best practices when selecting traders on Ayondo.

ü      Practice patience. If you cannot be patient and trust in your own analysis, you may get into a lot of problems with selecting traders. After you have made your own analysis and are determined who are the best traders to follow, trust in your decision making and give it time for it to work out. Do not switch traders unnecessarily. A good method to avoid constantly switching between traders is to decide ahead of time under which circumstances you would change a trader. For instance, you can decide that you will only change a trader if they exceed their historical maximum drawdown.

ü      Keep reminding yourself that most of the followers who follow popular traders have not actually done any analysis research on them. They simply assume that everyone else who is following the popular trader must have done the research for them. Most of the time, this is not the case and even when it is, it is unlikely that the investment objectives are completely compatible with the ‘herd’.

Become a competent investor

Smart investors in all markets understand that the surest way to get mediocre returns or even to run into losses with an investment is to enter into an arrangement that you do not understand. Social trading is no different. We cannot get into social trading without any understanding of how to get the returns you want and expect to get lucky and gain profit.

As an investor, you should equip yourself with the knowledge and all the aspects of social trading in Ayondo before you ever commit to live trading. Learn about social trading, learn about Ayondo, learn about the best practices in Ayondo and test out your new learned skills in a demo account first. Here is a check list of the bare minimums of getting yourself competent enough to invest in Ayondo.

ü  Learn how Ayondo actually works. It is important that you understand the Ayondo Social Trading Platform. You should be able to use all the social trading functions of the platform with ease.

ü  Check out the comprehensive Ayondo review in order to get an overview of the Ayondo platform and after that, go through the ‘Ayondo trading guide’ page to get an easy guide on how to open and set up your account.

ü  Finally, open an account with Ayondo and practice what you have learnt.

Learn from other investors

In Ayondo, you can check out the performances of other investors and examine their portfolio configurations. This means that you can save yourself a lot of the hustle that would come with a trial and error approach.

Also in Ayondo, you can copy the portfolio configurations of a copier that you like. This basically means that you can save yourself all the work of copying every customization that they may have made. This is quite a useful tool; however we advise that you use it sparingly. Why? Rule of thumb of social trading:- Rely on your own analysis.  As we will see below, every investor has different investment objective, so it is quite difficult to determine exactly if the copier you are following has the same objectives as you. Or if they are as diligent in selecting traders as you are.

The point here is to learn from others but nonetheless, you must take complete responsibility for your trading. If you want to copy a follower’s configuration and then optimize it for your own needs, then that’s fine. We think that if you have your own trading plan and criteria for trader selection, it is unlikely that you will find a follower who has a configuration that fits your exact needs.

We have seen that Investing with Ayondo can be a very fruitful venture for social traders. In order to ensure your success, it is important that you come up with you own goals for investing with Ayondo. These goals will guide you to making all the important decisions when trading. And when your goals are set, you must ensure that you are competent to actually make your own analysis to screen traders. Because of this step of taking time to ensure your own competence, you can become confident in following your own analysis and sticking to it. Finally, in order to ensure success;  learn from other followers but not blindly.

Summary

Ayondo is definitely a contender for one of the best social trading service providers. If you ignore the fact that it is not really ‘social’ then it is definitely a good choice. Ayondo is trade and performance oriented. The fact that signal providers are rewarded for taking on responsible risk, sets it apart from other platforms.

Pros

  • Ayondo is a very transparent model of operation
  • If you are from Europe then Ayondo is well regulated
  • Signal providers’ remuneration is tied to the risk they take on
  • Low cost to open a live account (only 100 Euros)
  • It has an easy to use interface
  • Demo account available
  • It has impressive risk management features

Cons

  • Their email customer support could definitely improve
  • For a social trading platform, it lacks any real social features that allow interaction between investors.

ZuluTrade Review

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ZuluTrade is one of the oldest participants in the social trading arena. Founded in 2007, it has been in business for over seven years and over time has won the confidence and admiration of many market players. ZuluTrade says that it developed as a response to the lack of a system to audit traders globally and enable them to share their knowledge with others.

At the time of this review, the ZuluTrade live transaction volume counter was at over $673,747,000,000. The number keeps ticking upwards every second and clearly, ZuluTrade participants are very active.

ZuluTrade aims to provide an open platform where traders can share their knowledge and that there is support for every platform available. The thing that truly stands out about ZuluTrade is the level of openness and transparency they aim at achieving.

Their desire to enable traders to connect with any trading platform is also a very ambitious goal. Let us see how well ZuluTrade is doing to meet its goals.

Company Registration and Regulation

Knowing the disciplinary and financial history of an organization you want to place your money with is very essential. You want to make sure that you can trust the organization in the sense that it is in a stable financial position.

It is also important to see if it has been involved in any cases involving breach of customers trust. ZuluTrade is regulated in the US. As a member of the National Features Association (NFA), ZuluTrade is approved to act as a forex firm, an introducing broker (IB), and as a commodity-trading advisor.

As per the NFA records, its business address is in Greece. We noted one record of a regulatory action taken by the NFA against ZuluTrade in 2011.

The NFA issued a complaint against ZuluTrade by charging it with failure to maintain the required adjusted net Capital (ANC), the failure to keep the required books and records, failure to maintain the required capital and failure to give the required notice to the NFA body once they became of the fact.

In this case, the decision for the case was based on an offer made by ZuluTrade for a $10,000 fine; where it neither denied nor admitted the allegations made against it. We did not find any other regulatory or disciplinary action taken against ZuluTrade after 2011.

Demo Accounts on ZuluTrade

ZuluTrade offers fully functional demo accounts that can help you get acquainted with their platform before you open a live account with them.  Signing up for a demo account is quite straightforward.

You have the option of signing up using Facebook to capture your personal information or to input the information manually. You will need to provide your name, email address, country and phone number.

Please be aware that when signing up using Facebook, ZuluTrade will get your profile picture and use it on your public page on ZuluTrade. We noted that there are no options to change the photo or delete unless you call their customer supports desk.

The last step in its signup process is choosing the base currency of your account, the amount of leverage you want and the balance in the account. The account will be activated promptly and you can login as soon as you verify your email address. Demo accounts are only active for thirty days.

Live Accounts

For live accounts, you will need to choose a partner broker to open your account with. There is an impressive list of 49 partner brokers, including ECNs to choose from.

It is unlikely that you will not find one that will suit your preferences.

From the live account signup page, you can sort out the brokers according to their commission in pips, their maximum available leverage and the minimum deposits that they require. When choosing a broker, it is important to take note of the historical slippage that each broker has been getting in relations to trades within the ZuluTrade platform. Slippage is the difference between the amount a trade is actually filled at and the entered amount.

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We noticed with concern that some brokers have some ridiculously high slippage, of even over 6pips! Slippage will affect your profits significantly or even run you into losses especially if your signal provider is utilizing a scalping strategy.

Scalping strategies are based on exploiting tiny movements in price and taking many trades targeting tiny profits with each trade. Either way, you still want to choose a broker who has the least slippage.  It would be a good idea to choose the same broker as your signal providers.

When you log in, you will be taken to your dashboard page. From this page, you can control all trading aspects of your accounts. In our opinion, dash board is well organized. It does take a while to get used to it though. For someone who has never used the interface, it will take a few tries to get used to it.

After a while though, the interface begins to feel natural and quite easy to use. We found that it is actually well planned out. Every action with just a few clicks.

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One of the things that we thought was really appealing about ZuluTrade is its accommodating stance on trading. It does not limit you to where or when you can be dealing with your account.

Apart from its web-based platform, ZuluTrade also has apps for iPad/iPhone, android, windows phone and BlackBerry. With these apps, you can monitor and close existing trades and also manually open new trades.

One of the thing that makes the apps so appealing was the fact that they enable you to control your risk at any time; you can adjust your Margin call-o-meter (we will get to that soon) and also the trade size that each signals provider has.

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The minimum amount of initial investment required to open a live account will vary form one broker to the other. For most brokers, it is about $300.

ZuluTrade does not require you to deposit money with them directly. They receive their compensation from your broker. As a trade follower, you will also not be withdrawing any money from them because you maintain your account with your broker. Procedures for deposits and withdrawals will thus vary from broker to broker.

Signal Providers on ZuluTrade

One of the strongest aspects that ZuluTrade can boast of is the massive size of signal providers that it has. Their number was over 10,000 at the time of this review and this number will probably keep on rising as Forex becomes more appealing and profitable.  Of course having a huge number of traders is one thing, their quality is another.

ZuluTrade does not vet its signal providers. Their performances and quality of traders vary wildly. We noted that anyone could become a signals provider.

From the thousands available, it will therefore take some effort on your part to choose a few good providers that will match your portfolio requirements. An important feature in ZuluTrade is that it shows you any other alias accounts that a trader may have. Therefore, this allows you to know which other accounts they are running currently or may have in the past.

From the performance table, you can see how traders and followers have been performing. There are two search modes to choose from: The simple mode and The advanced mode. When you are in the simple mode on the traders tab, you can see the number of followers a trader has, their annualized return on investments, their rank on ZuluTrade, the amount of money following them and the number of weeks they have been actively trading.

There is also a tiny graph to illustrate the general progress of the trader’s account. The advanced search mode adds the maximum draw down ratio, the average pips per trade and their percentage of winning trades at the displayed data.

Naturally, you could be tempted to stick to the top traders on the first page, however we did notice that quite a number of the top performing followers do not simply follow the top ten traders. Some of them followed traders ranked even at 243 and still had decent returns.

The point is that there is a large number of traders to choose from in ZuluTrade. A good number of them have good and relatively consistent profits but most of these traders will not be on the first page of the search results. Therefore, it is necessary for you to do quite a bit of digging to find them. The search interface in the advance mode will allow you to put filters on your search results and reduce the number of traders that will show up.

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We also found that even after putting some filters, the number that showed up (of traders who met our criteria) was still quite overwhelming. This is not a bad thing at all. In fact, it means you have the luxury to be choosy with the traders you may want and still get a decent number of traders to follow.

We should also mention that just as there are very good traders, so are the unreliable ones.

ZuluTrade has a large number of traders and we found quite a number of them to be too risky for our taste, so it is a good idea to do your due diligence in deciding which trader you would like to follow.

No matter which trader you choose though, it is also important to use a good risk management strategy to minimize your risk. We will look at the risk management features on ZuluTrade in a while.

It is important to note that signal providers are not necessarily using real money. It is possible for signal providers to be using demo accounts, this means that they do not have any of their own equity at risk and because of that, they may take unnecessary risks with their follower’s account. To add to that, they are paid according to the number of lots following them.

This will mean that they get a share of the spread you incur in your account. They are also paid regardless of whether the trade was profitable or not. Cumulatively, the effect of this set up is that signal providers have an interest to make more trade even if the trades are not necessary and this is the case even if it is not practiced. There is always a sense of comfort in following a trader who is actually trading with significant amounts of their own equity.

Following Traders

When you go to a trader’s individual page, there is information about his past performances. Although past performances does not indicate how future performances will be like, there are various past performances indicators that will help you gauge how an individual traders performance may fit into your portfolio.

You can view these indicators at different time frames as much as you want. Apart from the returns on investments, other indicators that you may want to look at are the maximum draw down, the pairs traded and most importantly the slippage per broker. The importance of checking the slippage per broker (relative to the trader’s trades) is that if your broker has a high slippage, your profits will be eroded away.

The great thing about ZuluTrade is that you can view and even download all past trades of a trader to analyze offline. This is a very useful feature for those of us who are very keen on details. Being able to download all the past trades of signal providers to an excel format or a CSV format is definitely one of the hallmarks of transparency in the industry and ZuluTrade deserves recognition for this.

You can use the back-test tool to simulate how your account could have performed with a given combination of traders in your portfolio. You will have to try several combinations of traders and tweak their individual settings until you find the perfect configuration for yourself. Of course as always, past performances and theoretical performances cannot guarantee you of future performances.

Once you find a trader that you want to follow, you simply click on the follow button on their page. If they have open trades, you will be asked to choose whether you would like to copy these trades. With each new trader you add, ZuluTrade will update your “Margin Call-o-Meter” based on their historical performance and risk history. The “Margin Call-o-Meter” shows how likely you are to get a margin call where you have too many open or losing trades to cover to the balance of your account. Even though this may provide some estimation of the risks you are exposed to, there is no guarantee that traders will follow their past strategies; which is the basis of the margin call-o-meter calculations.

From your dashboard, you can control how each traders’ trades are copied into your account and thus customize your portfolio to your own preference.  From the custom mode screen, you can choose the maximum number of traders that can be opened by each trader or more specifically, by each trader per each currency pair. You can also set the minimum and maximum number of lots a trader can open at any time and set your default stops for each trader.

ZuluGuard

You can also enable ZuluGuard for each trader individually. ZuluGuard allows you to protect your account against unwanted behaviors from a trader. When the trader triggers certain actions, the system may choose to close all his positions, stop following him or replace him with a higher-ranking trader on ZuluTrade.  One curious feature we found was the option to reverse the trades entered by a trader. This means that you would enter a SELL signal if they give a BUY signal and vice versa. It is not clear how this could be useful to a follower, since traders naturally attempt to make profits, but it is there.

Profitability and Performance

At the time of this review, the top follower had an actual return on investment (ROI) of 225% within 15 weeks of trading. He was just following three traders. With a “Margin Call -o- meter” at 86%, his annualized (theoretical) income in a year would be 779%.

We also noted that most of the top followers with impressive performances had been trading for less than 25 weeks. There are a few though that were beyond 52 weeks mark but their annualized returns was nowhere near the +700% level. It was concentrated at 50% to +100% levels. This means that taking a relatively high amount of risk and being profitable on ZuluTrade is possible; being consistently profitable is also possible with managed risk.

Costs

If you use ZuluTrade when trading with a live account, you will incur several other charges on top of your normal broker costs. Expect to be charged a commission on top of the normal spreads of your broker of about 2 pips or more (it will vary per broker). Though this is not too high for most strategies, it might really sting anyone employing a scalping strategy. So, there is a need to make sure that the strategy your signals provider is employing would adequately cover the commission or else you will still be charged by your broker.

As we had noted the minimum amount to sign up will vary with each broker, the least seems to be $300.

You should be on the lookout for how much spreads and slippage you will be incurring with each broker you are using. Normally you are better off with sticking to the same broker as your signals provider.

Community/ social

ZuluTrade is truly a social trading platform as it has several features that allow people to interact with one another.  Traders have to leave a description of their trading strategy and also a status update on their pages. Followers can rate traders on three criterias: 1) Whether they make money from the trader 2) Whether the traders followed their trading strategy as they had described and 3) Whether they would recommend the trader to other users. These ratings are useful when trying to decide if you want to follow the trader.

Followers can also leave comments on the trader’s page and other traders can like the comments. A wonderful feature in this social aspect of ZuluTrade is that you can translate everything written in other foreign languages to English.  Even though the translation may not be grammar-perfect, you will definitely get the gist of the messages.

On every follower’s page, you can see what the trader is following, and those that they are using. You can also see their account setting and copy their settings to your account. To do this automatically however, you will need to disable auto mode from your account settings.

ZuluTrade is integrated with popular social networking sites and at the top of your dashboard; you can enable or disable these features as you want.

Education/training resources

ZuluTrade also have some educational material available on their site. Most of the material is centered on the use of their platforms. They however provide market news that can be quite useful for traders. You can access the economic calendar events coming up and those that have passed. We were very pleased to find that the calendar is actually very useful and very well organized compared to others.

Support

ZuluTrade has both email and phone customer support. We found their service to be very helpful and responsive. In fact, an average email reply did not take more than 6 hours on weekdays, which was very refreshing! We also noted that they support several languages apart from English, which will be useful for international users whose first language is not English.

If you have an urgent query, you can choose to have a live chat by choosing the “chat with a specialist” option displayed at the bottom of every page of their website.

Zulutrade6

ZuluTrade Tips and Tricks

Once you have decided to get serious with social trading and settle on ZuluTrade as the platform you prefer, what next? Every traveller knows that when you decide to embark on a new journey, it is important to get as much information as you can about the journey. Social trading is not as different. In this journey, there are several pitfalls and potential trap that every investor should be aware of. We will reveal all of them here. On the other hand, there are also many shortcuts and wonderful tricks that will make your journey relatively a breeze and a success. On Social Trading Secrets, we have sent scouts to check out the terrain ahead and their reports will help you make consistent profits to your account.

Here are some tips and tricks with ZuluTrade that will ensure that you are profitable from the first month onward.

It is important that you read these tips first, before you even decide on which broker you want to use. Why? Because observing the principles we reveal here, will make the difference between a winning, profitable account and a losing account. We recommend that you examine them carefully and then decide on how you want to approach social trading.

Define your Investment goals

First before you even begin to invest, it is important that you define your investment goals clearly. Ask yourself these questions and write down the answers if you are serious about making money on social trading:

“What do I want to Achieve?”

Unless you can come up with concrete answers to this question, being profitable in social trading will be very hard. You need to have a very clear goal so that you can know when it is being met. Your goals can be in terms of return in investment and risk exposure factors.

“How much am I willing to risk?”

You need to know how much capital you are willing to put on the line otherwise, you may find that you put too little or too much in your account. You should also realize that you may not take seeing your account going below a certain percentage. Variations in your account size for both should be anticipated as you start investing.  As a rule of thumb, do not trade with money that you cannot afford to lose. Answering that question will determine how much your initial deposit will be. It will also determine the risk management features you will put in place.

“What sort of signals provider do I want?”

Now that you know your goals and risk tolerance, it is time to decide on the signal providers. Notice that we are creating the criteria for selecting signal providers before you even see the actual traders. The trick is that when you already know beforehand what type of signal providers you are looking for; it will be much easier to find them. You will be much more objective in your selection.

Define your preferences according to performance criterias such as return on investment, maximum draw down, average pips per trade and aggressiveness. Obviously, selecting your signal providers is one of the most important parts of social trading. Please see the ZuluTrade social trader’s tips for more on this topic.

“How will I monitor and control my account?”

Once you know what traders you will be looking for and how their performance out to look like, the nest important step is to know how you will be keeping up with your account. The big kept secret of social trading is following up and management of performance. This is an area where we have to excel in. Remember social trading is about investing in people. It is not enough to select a signal provider and forgetting about everything. We need to dedicate about three hour a week to check on how well your account is doing. We found that the weekend is a good time because the markets are closed and there will probably be no open trades in your account.

Come up with a personal plan

Once you have clearly defined your goals. It is time for you to come up with a plan to meet them. You can be as flexible or as rigid as you want, as long as you have a plan that will help you get to your investment goals.

Your plan should be about the things that you can do for yourself. For instance, you could plan to check on the progress of newer signal providers that you may not be following at the time. You can also plan to have a pool of signal providers whose trading style you are familiar with and that you could potentially add them to your account if and when the need arises. This would come in handy should any of your providers fail you. Hence you would be able to replace them quickly without having to reinvest too much time on finding new signal providers.

When selecting brokers

When you go to the brokers selection page, you will notice that there are 42 brokers available for you to choose from. The number of options available to you to sort and select the most suitable one is quite useful however; they are not comprehensive enough for you to make an informed decision. We also noted that if you have no idea of how all the brokers work, in reality you will be making a decision with only a fraction of the information you have. Here are some tips for you to make the most out of the process.

  1. Do your own research on the broker you want to choose. Use the brokers selection tools as an initial guideline only. The same rules apply when selecting a broker on ZuluTrade as when selecting broker for personal trading: Stay informed. The main question you should ask is whether you would deal with that broker if ZuluTrade was out of the picture? As a rule of thumb, only enter into a contract with a broker that you are confident with their services. Remember, your primary contract is with your broker not with ZuluTrade.
  2. Open a demo account first and Select your favorite signal providers. After you are certain that you want to work with them, check out how much slippage your broker has experiences with. Slippage can eat all your profits or even run you into a net loss. Take a look at the two examples below:

First eagle

First eagle Slippage Tab

eagle_65 Slippage Tab

eagle_65 Slippage Tab

Notice that the signal providers are using different brokers. If your broker was any one on the bar graphs; how would you like his slippage to be like?  Check out their average pips per trade and the slippage of each broker. If you were following any of these signal providers, wouldn’t you rather be trading using DUKASCOPY? We would also completely stay away from NORDFX.

This is where most un-informed investors get it wrong. First eagle is the top ranked signal provider on ZuluTrade, yet he only has a 57% trader rating. This means that only about 57% of his followers reported to have made money from the signals! To see how this is possible, look at the average pips of First Eagle, there are only 9 pips per trade. This obviously shows that the trader predominantly utilizes some scalping strategies. If you were to choose NORDFX as your broker, you would lose about 4 pips of those 9 pips on every winning trade and on top of that, you will be losing 4 pips more for every losing trade! Now add on top of these losses, the commission you will be paying for every trade (for NORDFX it is 2 pips). For winning trades, you would expect only 3 pips (assuming that there is no slippage when trade closes). For losing trades, it will lose 6 more pips on each trade.

First eagle is clearly a popular signal provider for many investors BUT if you choose a broker with a huge slippage, you will most likely wipe out your account in the long run. In this case, when choosing brokers, we would automatically choose DUKASCOPY or FX OPEN ECN. No matter who our broker is, we would also stay away from first eagle even if he is the top ranked trader by ZuluTrade!

  1. Check out Funding options available and withdrawal policy and charges from the broker you want to choose. Are they accommodating to your needs? Always remember that your primary contract even in social trading is with your broker. You should be comfortable with every aspect of your broker.
  2. An important point we noticed is that overall, AAAFx  seem to be a much better broker when dealing with ZuluTrade. Therefore, we think that it is a good idea to consider the merits of AAAFx seriously:-
  • No commission,
  • Full integration with ZuluTrade and
  • A full refund policy

Of course, some of the top quality ECNs technically match these advantages and out do them in some cases. For instance, you will notice that AAAFX seem to have a constant 1 pip slippage. This significantly reduces any advantage you may derive from paying ‘no commission’ because the effect of slippage and commission to your bottom line is the same; they just take your pips away.

Now looking at DUKASCOPY as in the example above, you would pay the same 1 pip per trade with little or no slippage. DUKASCOPY’s client’s deposits are protected by the Swiss government up to 100,000 CHF (about 111,000 USD) and they also enjoy guaranteed liquidity of up to 50 million.

When setting up your account

When you log into your account for the first time, the account set up wizard will show up. If you are not familiar with ZuluTrade yet, we would recommend that you do not use the wizard at all. We found that using the wizard can easily lead you to make unintended or at the least uninformed configurations to your account. However, you can consider enabling ZuluGuard if you want to take a more cautious approach. If you do use the wizard, we recommend that you uncheck the??? option for opening all the present trades that the trader has opened. This is because for those trades, you would have missed their entries. If you enter too late on a trade, they may result in a loss especially if your signals provider is targeting smaller pips or is just about to close them. You will still pay commission on these trades even when they result in losses.

When you are taken to your dashboard, get familiar with the platform and do not take any trades yourself unless you FULLY understand the platform. In a live account, please understand that every trade you take; you commit your funds. Therefore, unless you are already familiar with the ZuluTrade platform and have a good reason to take trade, do not take any trades yet.

Open a demo account to practice using the platform, even if you do not intend to be trading for yourself. A demo account will help you better understand how ZuluTrade works without risking your cash. Ensure you are fully capable of adding, managing and removing signal providers from your portfolio. This will not be too hard and on ZuluTrade, it is quite intuitive. For information on how to do this, check out the full ZuluTrade review page.

Now when it comes to the risk-meter and ZuluGuard? We found that they could be useful for an investor who is not too much into the details of what is actually going on in their accounts, but still want to have some level of risk control. The risk-meter gives you a rough way to adjust the risks you take on and you do not have to think about it too much. Just slide the percentage to a number that feels good to you. We also noticed that the top performing followers in terms of return on investments, had a very high risk-meter setting.

Summary

To be successful in social trading requires us to have a very clear investment goals from the time we begin. These goals are the basis of all our investment decisions; they will keep us focused when challenges occur during the journey.

Even though we may only do this once, broker selection is an important process that requires special attention when beginning to invest. Trading on ZuluTrade can be a pleasurable experience especially for a well-prepared investor. Taking the time to learn these tips of trading is a great start for you. Please see the full review on ZuluTrade for a comprehensive review of the platform.

ZuluTrade is one of the most active social trading platforms out there. There are very few if any, other platforms that can boast of a better social trading environment than the one on ZuluTrade. The strengths for ZuluTrade are its transparency and focus on a great user experience.

Even though it requires a bit of digging around to find a good trader to follow, the rich selection of traders with diverse strategies is definitely to its credit. A follower capable of putting just a bit of effort in getting the right traders on his or her portfolio will certainly reap benefits. Overall, ZuluTrade should be among the top contenders for the top social trading platforms available today.

Pros

  • Availability of a demo account
  • Low cost to start trading on live accounts
  • A very transparent working model
  • A massive size of signal providers to choose from
  • A wide selection and support for mobile apps
  • Very social, followers are able to comment on trader’s performance and give feedback.
  • Trades from each trader are very customizable

Cons

  • It requires quite a bit of effort on your side especially when selecting traders to follow
  • You will need to do regular monitoring of your account
  • Using ZuluTrade will require you to have a bit of knowledge on risk management
  • The slippage with some brokers can be quite high

eToro Social Trading Review

 

eToro review

eToro was founded in 2007. Today it boasts as the world’s largest social investment network with over 2.75 million users across the world.

eToro aims to provide users with a simple, transparent and enjoyable way to trade in the global markets. It promises to be able to provide anyone; regardless of his or her investment style, with the right tools to further improve their trading. Among eToro’s goals is to gain your trust through transparency in their conduct.

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Over time, eToro has become a major participant in developing the social trading environment.

We decided to check out how well it is doing to meet its objectives and how usable it is to an average investor.

Regulation

Initially when we began to investigate the company’s cooperate structure, we were amazed at the complexity of its cooperate network. It is not immediately apparent how the company is organized and in its website, it does not make it apparent. We realized that demonstrating the actual organization of eToro would be challenging to get across, so here we will list the names and details of different organizations associated with the eToro group.

  • eToro (Europe) Ltd: This is a company incorporated under the laws of the Republic of Cyprus and is regulated in Cyprus by the Cypriote Securities and Exchange Committee (CYSEC). It has its address in Limassol, Cyprus. This is the companies you enter into a contract with, once you fund your account. Formally, it was known as RetailFx Ltd.
  • eToro Group Limited: This is an unregulated company resident in the British Virgin Islands. It is also an approved principle of eTORO USA LLC. If your account is not funded and your contract is with this company; you would not enjoy any protection enjoyed by consumers under CYSEC regulations.
  • eTORO USA LLC: This is a Limited Liability Company registered in the US and a National Features Association (NFA) member. At the time of this review dated May 2014, ETORO USA LLC is registered only as an introducing broker (IB). Its business address is in Tel Aviv Israel and according to NFA records, it was formally known as TRADONOMI LLC. Earlier this year, its status as a “forex firm pending” was withdrawn. Consequently as we had noted, it is registered as an introducing broker (IB) only in the US.
  • eToro (UK) Ltd: This is a company with its principle address in London (UK), that is authorized to carry operations within the UK.

In our very intensive search on the major regulators databases, we could not find any disciplinary financial or regulatory cases involving any of these companies. So eToro gets a clean bill of health from us.

eToro acts as a broker itself, therefore there is no need to sign up with any other brokers. It also does not provide signals for use with other brokers. We were happy to see that eToro provides its traders with a comprehensive list of investment instruments to choose from; including currencies, commodities, indices, stocks and even Bitcoin. All transaction executed in eToro are in the form of Contract for difference (CFDs).

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Demo accounts On eToro

It is important to test out the services offered by a company before depositing your money with them. As many other service providers, eToro also provides prospective customers with a free, fully functional demo account.

From the demo account, you can gauge how much your performance would be under different settings. It also allows you to be acquainted with the eToro’s trading platform and user interface.

Opening a demo account is a straightforward process. You can opt to open your account using Facebook to provide your personal details. You will need to provide your phone number to verify your account.

Live accounts

At any point, you can open a live account with eToro by simply funding your Demo account or choosing to register for a new one. Apart from the information required for opening a demo account, you will need to provide details of your payment methods. You will be happy to note that there are many funding options available to investors including Credit Card, PayPal, Neteller/1-Pay, Skrill (MoneyBookers), WebMoney, GiroPay (available in Germany only) and Wire Transfer.

One of the primary consideration for choosing a funding option, (apart from its availability), is the deposit limitation on each method.

Apart from a wire transfer, which has a minimum deposit of $500, every other option can be funded with at least $50.  There is no upper limit on the funding amount that is allowed through wire transfer. On the other hand, the maximum amount allowed for Credit Cards and Skrill funding is $5,000, while for all other methods it is $50,000.

The next question to consider is how do you withdraw money from eToro?

eToro has several methods available for withdrawing funds. These are PayPal, Skrill, Credit Cards as well as Bank Transfers that take between 4-7 days to process. We noted that for the Credit Card funding option, you will only be able to use a card that has been used in the system, when you deposited money under your name initially. On top of this, you will only be able to withdraw up to the amount you deposited. This essentially means that if you make a profit you will need to use other means to withdraw your profits.

eToro makes it very clear that it does not process withdrawals through MoneyGram or Western Union. The minimum amount that can be processed for any withdrawal is $20. There are certain fees that you will be charged, for each withdrawal ranging from $5-$25. It is important to note that there are severe restrictions imposed on withdrawing money or credits earned through its promotion. Basically, eToro classifies these credits from its promotions as “Non-Withdrawable Amounts” (NWA) and the only way to convert NWA to “Withdrawable amounts” (WA) is by earning portions of the amounts by incurring cost of spreads. A small percentage of this spreads (about 20%) is used to reduce your NWA.

eToro also has an android and iPhone/iPad app called “eToro Mobile Trader” readily available. From the app, you can follow the progress of your account and trade ‘on the go’. Using this app, you are able to view charts, access price quotes and trade with the available instruments. You can also fully manage your portfolio from the apps. You will also find an “eToro OpenBook social trading app” available for android and iPhone/iPad. This app caters to the social trading aspects of the network on the mobile platform which allows you to follow and copy from your favorite investors. You can also get news about your favorite markets from your mobile device.

Professional Investors on Etoro

eToro has a large number of signal providers that were formally called ‘gurus’, but that name was dropped and they are now called ‘Professional Investors’. It does not vet its professional investors and basically anyone with an account can become a professional trader. For a trader to be called a professional trader, eToro requires that their real names be used and a verified photo be displayed in their profile.

There is an admirable sense of openness in eToro. Meaning that followers can follow other followers and copy their accounts configuration. This makes it easy to develop a functioning portfolio rapidly based on the social intelligence of the network and the people you follow. Of course, this is not advisable but you can basically have a nice portfolio without actually viewing the professional traders you actually are following.

The quality of the signal providers vary wildly. There are some with consistent profits and small maximum draw down and as with any other network; some of the providers have quite scary results.  It is therefore important to carefully choose your signal providers wisely.  eToro has several helpful features in OpenBook that helps you find your ‘perfect’ trader.  We choose to start with ‘people rankings’ list to test how easy it was to use. From this list, you can find traders based on the number of followers they have. You can filter your results using many criterias so that you end up with a manageable number of traders to scrutinize.

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eToro has an intuitive Discover people feature and even though it seems to still be in beta; we could not find any serious faults with it. Searching and finding traders is definitely much easier using this tool and it is very easy to get used to it. The interface is very intelligently designed in such a way; that doesn’t require you to keep going back and forth. You will usually get what you want by simply doing what feels right the first time. You would have to check it out for yourself to fully understand what we mean.

Another lovely feature of the discover tool is that it is easy to customize the data that is shown. From the top row of each column of data, you can choose which data is relevant to you and simply change it. We like the fact that the designers do not presume to know the data set that is important to us and allows us the freedom to choose. Perhaps the only feature that most people will find unsatisfactory is the number of columns that are displayed. At the time of our review; there were only four columns of data available. An increase from that number would be great.

eToro aims to provide a simple to use platform for everyone. So the information displayed about each professional trader is kept simple–to-understand and useful. eToro does not bury you with endless statistics, it simply gives you the bottom line. This arrangement did not satisfy some of our meticulous, detail-oriented members of our review team, but we agree that the information available is enough for an average prudent follower to make a wise decision. The information about returns on investment (ROI) is presented as a percentage within a given time period. This makes it easy to compare the performances of different traders with each other. You will be disappointed as we were, to note that you can neither access the full trading history of a trader nor download it.

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Following signal providers

To follow a trader, you simply need to click on the ‘follow’ button on their profile. A popup will ask you to indicate the amount of money you want to allocate to the trader. If the trader is using a virtual account, you will also find out from this pop up.  If you wish, you can choose to open all the current open trades that of the trader; though we do not recommend doing this.

Trades in the traders account will be copied proportionally to your account depending on the risk management feature you have put in place. You can only assign a maximum of 20% of your equity to a single trader and you can copy up to a maximum of 20 traders at a time.

Your level of risk per trader primarily depends on how much of your capital you have allocated to each trader and the risk profile of that individual trader. If a trader takes small percentage risks on his account, the equity you have allocated to them will also be exposed to the same risk.

So assuming you are following just two professional traders and allocated to trader A 15% of your equity and to trader B the maximum 20% of your equity. Then trader A takes several trades that expose his account to 30% risk and trader B takes trades exposing his account to 10% risk. If at the time, your account has no other trades open, your total risk exposure will be:

[ (15/100) x (20/100) ] + [ (20/100) x (10/100)]

=0.065 or 6.5% risk exposure

We love the straightforward nature of equity allocation and risk management on eToro. The risk management features within eToro are easy to understand and manage. We especially love the fact that you allocate equity to each trader in terms of actual units, which makes it even easier to understand exactly how much you are putting under his or her control and how much you are risking.

Costs

The costs that you will incur when trading with eToro are mainly in terms of spreads. When we checked the spreads for currencies, it was up to 9pips for the EUR/CAD pair (this was the highest). The EUR/USD had a spread of 3pips and the least was 2pips of USD/JPY. Other instruments also had their own fixed above average spreads (they hurt your earnings more). At the time of our testing, we did not notice any slippage in execution, which somewhat makes up for the high spreads.

You will be charged a fee if you leave your trades open over the weekend but none for overnight traders on the weekdays. Other fees that you will incur with eToro as we had mentioned earlier are the withdrawal charges. They are from $5 for withdrawal amounts from $20 to $200, $10 for withdrawal amounts between $200-$500 and $25 for amounts above $500.

Community and social features

We found eToro to be a very social and lively environment; traders are capable of interacting with their followers and vice versa; almost to the same degree as they would on Facebook. On the site, some traders are quite active socially and provide regular updates on their trades. We find this to be very refreshing compared to other networks. Followers can leave comments on a trader’s wall and other traders can comment on it or like it.

The capability to interact with your traders at this level may provide some level of understanding of who the trader actually is and may potentially help followers decide whether they want to follow the trader.

Education/training resources

eToro has a trading academy where novice traders can learn about trading. There may not be much information to learn for advanced traders but certainly, the information there is valuable for the person just starting out on trading. The learning academy has a section for teaching social trading which we found to be quite immersive. Apart from the academy, eToro also maintains a blog that is active with regular updates and periodic live webinars.

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Support

eToro has both email and telephone support. We find the email support to be very responsive and helpful. Email response took about 3 hours on trading time.

There is a section in the website dedicated to frequently asked questions which we found quite useful. For those who are unfamiliar with eToro, this will be a useful page to browse at.

ETORO Tips and Tricks

Consciously, making the decision to become the best investor you possibly can, will be your highest goal. It will help you make better decisions. Taking time to go through the guides we have provided for you at social trading secrets is a good step in this direction.  On this page, we have prepared some of the tips and tricks that will help you to become a better investor on eToro. Take your time to read them and develop your investment plan accordingly.

Set your own goals

The most important part of any task is to know what you are doing and why. It is no different with social trading. You should be able to describe what you want to get out of social trading with clarity. You want to define your investment goals clearly from the moment you start, so that you can easily determine the following :-

  • Who can help you meet them (traders and followers)
  • When your investment goals are being met
  • When they are not being met
  • How to review and optimize your eToro activity in order to meet your goals

When defining your goals, you can have as many or as few criterias for measuring your performances as you want. Remember, it is your capital on the line and you have the final say.  Here are some of the criterias you can use to define and measure your investment goals.

  • Return on investment. The return on investment is the profit you gain over a given period expressed as a percentage of the initial amount at the beginning of that period. You can choose to define your investment goals in terms of how much return on investment you want to gain.Keep in mind that eToro gain is not equivalent to return on investment. The formula they use employs a weighted return and does not give you the actual return on investment. This can be misleading, so it is important to do your own calculations. For more information on the method used on eToro, please see the section on estimation of returns on the ‘eToro trader selection’ page.
  • Risk tolerance. This is simply the amount of risk you are willing to take on. You should determine in your goals how much risk you are going to expose yourself to before you begin trading. The risk tolerance will determine the amount of money you deposit initially and the way you allocate that money among the traders you follow. Your risk tolerance will also tell you which traders you want to follow based on their historical risk profile.
  • Traders to follow. The traders you follow will ultimately be the single most important factor in determining your success or failure. Take time to determine the types of traders you want to follow. For an in-depth guide on how to select traders, check out the eToro ‘selecting social traders’ page.
  • Account monitoring. It is important that you set goals on how you will monitor your account. These goals can be in terms of a plan and a schedule of the time you will allocate for social trading. See the sections below for details on how you can monitor your account.

Spend more time learning

One of the biggest mistakes that new investors make when they are starting out is assuming that they already know how to trade. Smart investors take the time to learn how to do their job. You will find it very beneficial to take some time to study the best methods to use on eToro. Here are some of the steps you can take.

  • Familiarize yourself with open book. You will be using the eToro’s open book platform to follow your account’s progress so get yourself familiar with how it works before you start live trading. Trade with virtual money and see how well you are able to use the platform. Make sure you can perform all the basic trading functions within the platform.
  • Check out the social trading videos in order to familiarize yourself with the basics of social trading on eToro.
  • Check out the trading interactive courses available on eToro. There is a wealth of information available both for traders and for investors. If you are a new investor, take time to see what skills you can learn from the resources available.
  • Make a point to check regularly for new webinars. Every now and then, you will find a webinar that catches your attention and that you want to attend. Being a regular attendee of these webinars will undoubtedly increase your knowledge and this will enable you to make better investment decisions on eToro.

etoro Interactive trading guide

  • Take time to go through the articles on this site which is related to eToro and social trading in general. You will notice that doing this regularly will enable you to gain knowledge and quickly learn the best trading practice. Also, please make sure you see the ‘eToro review’ page for an in-depth analysis of eToro and an overview of what to expect from the platform.

Demo trading

***eToro allows you to practice trading with virtual money. We recommend that you take some time to use virtual money to gauge how well you could perform on eToro. Of course, theoretical returns do not indicate future performance on live trading but it will enable you to get better at using the platform.

It is a good idea to use a realistic amount or that which is close to the money you will be depositing in order to get the best estimates for what you are actually capable of. It will also help you determine beforehand how to allocate your capital and control risk.

Use the Discover People Tool

We have found that searching for traders to follow, to be dramatically easy when using this tool. You want to check it out when locating your traders and we have no doubt that it will be more useful compared to the other search and ranking tool.

Etoro discover people tool

With the ‘discover people tool’ on eToro, you can define your own search parameters that you want to see in the columns and arrange them according to your level of importance. There is an in depth description of this tool on the comprehensive ‘eToro review’ page on this site.

Following up and monitoring your account

When will you check and evaluate the progress of your account? It is important that you set aside a specific time in your schedule to do the required follow up. We cannot possibly over emphasize this point! You need to monitor your account. As an investor, you ought to take full responsibility for your own success in social trading. Setting aside time to manage capital allocation  is an important part  as well as success in this area.

Ask yourself these questions

  • How much time will I spend on eToro per day?
  • How much time will I spend following up on my account per week?
  • How do I want to review the progress of my account?
  • What performance indicators will I look at?
  • How will I monitor new traders to add to my people’s portfolio?

Answering these questions will help you come up with a plan for achieving your goals and crucially spend the required time on eToro efficiently. Make sure you take time to answer them.

Consistency

For you to attain consistent results, it is important that you look for consistency in the traders you copy. Check to see if the trader has been having consistent returns over the last six months to a year. Can you tell whether the trader is following their trading strategy always? If the trader has provided a description of their trading strategy, they should follow it strictly. If they have not described it, whatever strategy they are using ought to have a relatively consistent performance in terms of outcome.

Another thing to check for in a trader is how they deal with losing trades and how much risk they take on. We have dealt with this issues in great details in the eToro ‘selecting social traders age’ page. Do take time to go through the information provided there.

It is equally important that you let your plan work out. After you have done your due diligence and selected the traders that you feel are the best to copy, give them time to perform as you had projected. Some investors are too quick to switch traders the first time they see a loss in their account. Remember, losses are as much a part of the business as profits. To be a smart investor, it is important to have a longer-term perspective on trading. We would recommend to only switch a trader when you are confident that the trader can no longer help you attain your investment goals or if there is another one that you are confident can do better.  There is no other reason to switch traders. Losing money in the short term is not a good enough reason unless it demonstrates incompetence.

Just like in any other business, to attain success in social trading requires you to use the best practices of the trade. It is important to make yourself a better investor according to your own defined goals. In the long run this approach will ensure that you attain a level of excellence that most investors cannot achieve.

Summary

When it comes to social trading, eToro is definitely one of the giants. It offers a truly social experience for investors and to top if off; it provides an open environment where ideas can be shared with like minded people.

The large number of trade providers available is definitely to eToro’s credit. It can be taken as a vote of confidence in their platform. Their relatively high spreads can be excused when we consider that there is virtually no slippage.

eToro will provide you with a large pool of investment instruments and you can easily diversify your portfolio. It also means that there will be a large number of trading set up available for you to trade on. All in all, eToro ought to be given serious consideration by anyone looking to venture into social trading and investments.

Pros

  • It is easy to sign up with eToro
  • There is no need to sign up with another broker
  • There is minimal slippage when executing trades
  • Availability of demo account
  • Very active community
  • eToro has an open sense of community and useful interaction
  • eToro has a very usable discovery tool that helps you find traders to follow
  • It has two mobile apps that support android and apple mobile devices
  • eToro has a simple and straightforward way to manage risk

Cons

  • Relatively higher spreads could cut into profits
  • Finding the right trader to follow will take some effort
  • The OpenBook platform can be too simplistic for any serious manual trading

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 Forex 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.

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 of new client acquisition and retention of older ones. 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 trading.

When online trading was popularised a few years ago, the only way you could trade forex was through technical or fundamental 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.

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 Forex Social Trading Work?

To help you understand forex 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.

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 specialized 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

1. 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.

2. Follow a Successful Forex 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.

3. 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.

Important Social Trading Tips

While social trading can be a fun and potentially profitable experience, it’s always important to learn more about how the process and concept works. Here are some tips for successful social trading:

  • Understand which social trading platform is the right choice for you. There are several prolific social trading platforms available to investors – such as EToro, Currensee and Zulutrade. While they all broadly work along the same lines, there are strong differences between them that could affect you. Some of these differences include the ways in which fees are calculated, what the minimum deposit needs to be and the levels of experience that “guru” traders need to have become ordinary investors can follow them.
  • Social trading may not require much technical trading or investing knowledge, but it is still important to devise a clear strategy on how you will allocate your trading funds. The high levels of transparency means you should be able to find a good trader to copy – this should be someone who has a long term history of generating profits.
  • If you’re totally new to social trading, you should start with a practice account, as offered by the major social trading sites. The key to using a dummy account to practice copy trading is to use the same amount of capital as you would if it were your real money. Once your dummy account starts to turn a regular profit you can then start trading with your real capital.
  • Risk management and allocating your capital is key with social trading. You need to remember that the more traders you elect to copy, the more trades the system will be making on your behalf and so the more capital you will need to have available. One big mistake that rookie social traders make is in not having sufficient capital for all the trades that their chosen traders make. Investigating a potential traders past will give you an indication of how many trades they typically have open at any given time.
  • When picking a social trader to copy, aim to find one who fits your own risk and trading profile. Traders vary wildly in their approaches and strategies  – you can find out more about a traders style by checking their profile and their trading history. Do they have more smaller, consistent winning trades or are there a few huge gains with many losses?
  •  How many followers does the social trader have? While it cannot be used as the definitive indicator, a trader with many live followers (ie those who are actively following the trader with real capital) is a good indicator of how good that trader might be.
  • Check the drawdown for each trader you are considering copying – how many times have their trading account been in deficit?
  • If you’re opting to follow a number of traders, make sure you analyze their trading styles and what they are their trading. The whole point of selecting more than one trader is to diversify risk – but if they are trading the same things at the same time, using the same strategy you’re not going to get much diversification with your trading results.
  • Practice sound risk management. As always with any investment type, good risk management will help preserve your capital and make sure that it grows as you practice social trading. Good risk management means trading with only a comfortable amount of capital and diversifying that capital sensibly.

Frequently Asked Questions About Forex Social Trading

It is very difficult and rare to make consistently good returns in the world of trading and investments. Very few traders, even seemingly professional ones are able to deliver robust growth over a long period of time.

To make the best possible returns with social trading, it is important to find those few traders who are able to do just that.

Thankfully, most social trading platforms are extremely transparent and offer many tools for investors to hunt down those profitable traders who can help maximise your returns. Sites like Etoro for example allow you to analyze each trade a trader has made, and you can find the percentage returns they have generated historically. It cuts down the time needed to shortlist the best traders – it’s always worth keeping in mind that just because a trader generated a profit last year, or over the last few years – that they will do so again.

Popular Social Trading Questions & Answers

Because social trading is such a new and exciting concept, a lot of people have several questions about it. It seems almost too good to be true at times, but done right social trading offers exactly what it says on the tin – a chance to trade alongside the experts, and achieve the same investment returns as them.

Here are some popular questions that people have about social trading:

Why Do Social Trading?

The simplicity and potency of social trading is why it has such appeal to many novice, would be investors. With social trading there is no need at all to understand the mechanics of the market, or investment basics and principals.

There is no need to learn ratios and analyze market conditions or which way one currency is likely to go against another. With social trading, the investor only has to research a good trader that they trust leaving their capital with, and allow that trader to grow their own account.

The Logistics Of Social Trading – How Do They Operate?

Once you open your account with a social trading network, you effectively agree to let the nominated broker associated to that site to execute trades on your behalf.

After the account has been funded, you simply select a professional trader to copy and the system will automatically open and close trades for you – exactly when the expert trader does. So, you should in theory make the exact same profit as the trader who you’re copying. In reality this does not always happen to the dollar – due to a concept called slippage.

Slippage is the  difference in price that is caused by a time delay between placing your order and having it executed. Prices move very fast in markets, and so you may not always get the same price as the trader you’re copying.

Even so, slippage should not cause much of a difference in your ultimate profit or loss. There are also fail safes in most social trading networks – so if the price moves too far away from your expert traders, the trade will be cancelled.

  • Do I Have To Pay Money To Trade Socially – The main social trading networks are free to join, and to start trading with. Normally, the actual cost to you as an investor will be the “spread” (the difference between a trades bid and ask price) and depending on the social trading site there may be a success fee on trades you make a profit on.
  • What Amount Of Capital Would I Need To Start Social Trading? Every social trading network has its own minimum level of deposit. In some, it can be as little as fifty dollars, but in some it is significantly higher. To make a real go of social trading it is recommended you start with at least $2,000.
  • Do I Need To Have Any Financial Or Trading Knowledge? While it is always good to have some financial and basic trading literacy, you need not know all that much about the technicals. The expert trader you select will be making the trading decisions for you.
  • Could I Lose Any Or All Of My Capital? As with all investments, there is no guarantee of profit, or that you will not lose a part or all of your capital. Trading is always risky, so you should only allocate that amount of capital that you are comfortable investing.
  • How Long Are Trades Open For Typically? This will vary greatly depending on the trader who trades for you. Each trader will have a unique trading method and style, and the time your trades are open for will largely depend on your traders strategy.  Some trades may open and close in a matter of hours, while others may stay open for weeks or even months. You can always check the history of a trader to see how long on average their trades are open for.

Using Basic Financial Ratios to Evaluate Trading Systems

When we browse through the leader boards and performance charts of traders on copy trading platforms, we are presented with how much return on investment (ROI) a trader made since they started trading or how many “pips” they made in the last month. While ROI and “Pips” can be used to measure the nominal performance of two traders, or among hundreds of traders, these metrics can also be very misleading to interpret for novice investors.

This is because, when you see a 30% ROI in a month, it does not say what kind of risks the trader or the system took in order to generate that reward or profit. Furthermore, one of the alarming aspects of the copy trading industry is the tendency of traders to develop systems that try to maximize the “win rate” over long-term sustainable ROI!

In order to evaluate the integrity and long-term prospects of a trader or their trading system, it is recommended that copy trading investors apply to following basic financial ratios:

Forex Financial Ratio to Consider # 1 – Profit Factor

financial ratio with profit risk and lossIf you think a system with a win rate of 98% will certainly make profits in the long run, this might not be your lucky day! There are hundreds of examples in the Forex copy trading circuit where a trader had almost 100% win rate for months, even years, then suddenly the system failed and investors lost everything.

You see, if a trader makes 100 trades, wins $1 per trade on 98 trades then lose $100 on the rest of the two trades; you got a profit of $98 and loss of $200! It is like a mini Black Swan (no, not the movie) event, but these happen all the time.

Hence, you need to keep an eye on the profit factor of the system. As long as the profit factor is above 1, it means the system made more money from all its winners compared to the sum of all losses. While a profit factor of 1+ is a sign of profitability, you should always consider investing in systems with a profit factor above 1.5, or even 2.

Forex Financial Ratio to Consider # 2 – Average Win Vs. Average Loss

The problem with profit factor is that while it is an excellent metric to sort out winning strategies and systems, it is vulnerable to the fact that when a flawed system keeps winning with a good win rate (i.e. 95% win rate) the profit factor will be above 1. Therefore, you may not be able to distinguish the flawed systems based on profit factor alone.

On the other hand, if you consider the average win and average loss of a system, it can reveal how the trader or his system actually trades the market. If the average win (pips or actual dollar figure) is higher than average loss, it meets the criteria of a genuinely good system.

For example, if the average win of a system is $100 and the average loss is $120, you can immediately tell that this system needs to have a win rate over 50% just to break even. Nevertheless, at 60% win rate, this system will produce (60 x $100) $6,000 in profit and (40 x $120) = $4,800 loss, or a $1,200 net profit over 100 trades. Therefore, based on this example, you should plug in the average win and average loss of a system along with the win rate to find the system will be profitable in the long run over 100s of trades.

Forex Financial Ratio to Consider # 3 – Sharpe Ratio

The Sharpe ratio is the holy grail of evaluating performance of a trader or system. The inventor actually won Nobel Prize for his work in economics. Anyway, the Sharpe ratio basically measures the risk adjusted return of a system. Hence, it can show you how well the trader is gaining profits based on the risks he is taking.

As a high reward can be achieved by taking insane risks, it is always a good idea to measure the performance of a system after discounting the risks. The Sharpe ratio compares the average rate of return of the system by comparing it to the risk free return you can get. For example, investing in Forex has risks, but putting your money in a government run savings scheme or bond has hardly any system risks. Therefore, with Sharpe ratio will help you understand what are the excess risks to the system takes in order to provide the extra return.

There are plenty of resources online to explore further regarding how the Sharpe ratio is calculated. You actually do not need to learn to do this yourself, as the most good trading platform will provide this ratio to you for free. But, if you fancy a bit of math time, head over to Investopedia and have a feast! What you need to know is that you should never consider investing in a system with a negative Sharpe ratio as it means you are better off investing in a risk-free asset like US T-Bill.

In fact, only consider investing in copy trading systems that has a Sharpe ratio of 0.5 to 1, or even better.

Conclusion

While the three financial ratios discussed here should help you get a basic understanding of how a copy trading system is generating profits, you should explore further on this subject. However, the important thing to remember that no single ratio will provide you the complete picture about a system. This is because we have different risk appetite. Some of us are comfortable seeing a 20% drawdown where others may lose their temper with a mere 5% drawdown. Hence, you have to combine various ratios to reach your own conclusions about a system based on your personal risk tolerance.

Best Social Trading Platforms

1. Etoro

Two brothers, Yoni Assia and Ronen Assia, collaborated with David Ring to develop one of the first social trading platforms in 2007 and founded eToro.com. Initially, eToro.com was launched as a financial trading platform in order to bring top class financial service to the masses.

The first product was download only and it had graphic trading visualization aids for traders. Later, eToro.com diversified its product portfolio and introduced more professional grade trading applications. Such as the “Expert Mode” and a cloud based trading platform called the “WebTrader.” eToro revolutionized the social trading concept by introducing its OpenBook social investment platform in 2010. The key feature of the OpenBook was the “Copy-Tradng” feature, which enabled investors to view, follow, and copy eToro network’s top traders.

Incorporated in Tel Aviv, Israel, eToro.com’s main research and development facility is still located there. Besides is office in Israel, eToro.com has registered offices in the United Kingdom, Australia, and Cyprus. The company employs around 250 people around the world.

eToro’s primary brokering services are provided by eToro (Europe) Ltd. It is registered as a Cypriot Investment Firm (CIF) (company registration number: HE200585) regulated by the Cypriot Securities & Exchange Commission (CySEC) under license number 109/10. eToro (Europe) Ltd. is also obligated to operate under the Markets in Financial Instruments Directive (MiFID).

eToro.com Review: Trading Services

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eToro.com currently offers its customers access to trading Stocks, Currencies, Commodities and various other Indices. While eToro provides live market price feed for most of its trading instruments, the stock price quotes are provided by Xignite, a third party financial market data provider.

“eToro is the first global marketplace for people to trade currencies, commodities, indices and stocks online in a simple, transparent, and more enjoyable way,” says eToro’s website.

Besides offering trading services, eToro.com also offers specialized social trading services via its OpenBook platform. It hosts a live stream of trading data from its traders. The data are made available on the eToro OpenBook platform for other investors.

In fact, each user’s trading performance is automatically uploaded and presented in their eToro OpenBook profile, where other users can then view their trading statistics. Each investor/trader can then set their accounts to copy any other trader/investor on the network. Under this system, eToro trading platform duplicates each trade made by the copied investor in the copier’s account.

The spreads charged by eToro.com depends the liquidity of the pair. With highly liquid pairs, such as the EUR/USD, it only charges two pips spread. Besides offering low spreads, eToro.com offers 400:1 leverage to its users.

In addition, traders can utilize demo account to try out their own trading skills as well as copy trades from other traders to evaluate before copying on their live account.

eToro.com Pros and Cons

Pros

  • Well regulated by Cypriot Securities & Exchange Commission (CySEC)
  • Ample traders are available on the social trading platform to suit different type of investors
  • The minimum deposit requirement is very low, users only need $50 to open a live account

Cons

  • As like any other copy trading platform eToro’s platform may lag and the slippage may pose a problem
  • eToro does not provide MetaTrader 4 platform for traders which means additional learning curve

eToro.com Review: Customer Support

eToro.com offers customer support to its users via various channels. Besides providing phone support from its United Kingdom, Cyprus and Australian corporate offices, eToro.com has online chat option and a fully staffed online help desk, which can be reached via email as well.

eToro.com Review: Trading Platforms

Since eToro.com is trying to offer a disruptive socially oriented trading platform for participating in the global markets, it does not provide any “downloadable” trading software.

In fact, unlike most brokers, it does not offer the popular MetaTrader 4 platform to its users. Instead, eToro.com takes pride in developing its own cloud based manual trading platform, the WebTrader.

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eToro.com also eliminates the need for over-complex charts and indicators and presents a social trading alternative called the eToro OpenBook. In contrast to using trading algorithm based “trading signals” eToro offers its users “crowd generated data” that aggregate a vast number of real trades to generate buy or sell signals. eToro has developed a Social Alert mobile app to deliver this crowd generated signals to users.

Social Trading with eToro.com

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eToro.com has developed a unique social trading platform where 3 million investors offer their portfolio to be copied by other investors. Its CopyTrader ™ is a groundbreaking system that enables you to copy other investors automatically and manage your copy trading activity just as you would manage investments in any other market.

eToro.com offers a people discovery tool that allows investors with a search mechanism that makes it easy to find traders according to specified criteria. For example, by searching with lowest drawdown or highest profits will list traders with those attributes.

Also, eToro.com’s Top Taders’ Insights widget provides investors with data from its top 1,000 profitable traders. This widget displays the top 10 most traded instruments, along with a breakdown into buy and sell positions, giving you an overall measurement of the sentiment among our most successful investors.

2. ZuluTrade

ZuluTrade.com was founded in 2007 by Leon Yohai and it is one of the most prominent social trading platforms in the Forex industry. In fact, ZuluTrade was one of the first copy trading platforms for the general public.

It was “created in response to the non-existence of a web-based platforms that could audit traders globally and at the same time; enable traders to share their knowledge with people interested in their strategies,” says ZuluTrade.com.

Since ZuluTrade.com is not a broker itself, it does not require traditional regulatory oversight.  However, it is registered as a corporation in Wilmington, Delaware. Also, ZuluTrade.com is NFA registered as a financial corporation and they are a member of U.S. Commodity Futures Trading Commission (CFTC) .

ZuluTrade.com facilitates the platform where investors can subscribe to a trader, and the trader executes the orders via a third party broker. Once the order is executed, ZuluTrade.com copies the trade and execute it on the customer account. Hence, the trader’s performance is reflected in its customer’s account.

ZuluTrade.com Review: Trading Services

ZuluTrade.com The vision of ZuluTrade.com is to:

“offer an open environment, where traders can globally connect to any trading platform and share their knowledge, in addition to receiving a commission every time someone uses their expertise to a live trade.”

ZuluTrade.com provides a social trading platform where customers can choose and pick their preferred traders based on track record and copy their trades. ZuluTrade.com currently supports a range of brokers who offers MetaTrader trading platform.

It  developed from scratch the API for the MT4 platform since Metaquotes did not provide an API. The spreads charged by ZuluTrade.com depends on each individual investor’s broker. Investors are particularly advised to watch the spreads offered by their brokers because often the traders put tight stop loss to minimize any losses.

If the trader’s account has lower spreads, and the investor’s broker has higher spreads with few pips of difference can result in a lost trade on the investor’s account due to higher bid/ask difference.

ZuluTrade.com

ZuluTrade.com traders can build their track record with demo accounts. However, they also have options to trade their live accounts to demonstrate confidence about their own trading ability and performance.

ZuluTrade.com also has a 30-day demo account for potential investors who wants to try out traders before deciding to follow them with real money.

ZuluTrade.com Pros and Cons

Pros

  • Well regulated as an NFA and CFTC member
  • Ample number of traders are available to suit different type of investors
  • ZuluRank ranks traders analyzing different factors, such as the amount of trading activity, the drawdown of each trade and the entire profit and loss (PnL)
  • No payout to traders if they end the month with a loss

Cons

  • The vast amount of traders makes it difficult to pick the right trader
  • Slippage can be a problem at times due to lag between ZuluTrade.com and Broker

ZuluTrade.com Review: Customer Support

ZuluTrade.com has comprehensive means to offer customer support. Besides email and online chat support 24 hours a day and 7 days a week, customers can call to avail support. ZuluTrade.com currently list numbers for United Kingdom, Germany, Russia, Spain, Greece, United States, Mexico, Colombia, Japan, China and Australia.

It also has a central support hotline for customers from other countries. Along with the traditional customer support channels, ZuluTrade.com has a dedicated forum, where both traders and investors can discuss about their concerns as well as share knowledge about social trading in a friendly but  moderated environment.

ZuluTrade.com Review: Trading Platforms

ZuluTrade.comZuluTrade.com offers its copy trading service to 60+ Forex brokers who utilize MetaTrader 4 platform to execute trades. However, it also has client side apps available for iPhone, iPads, Android smartphones, BlackBerry Playbook and Z10 app.

ZuluTrade.com subsequently launched their Windows phone app. ZuluTrade.com customers can login to the web interface or the phone/tablet  app to monitor the progress of their account.

ZuluTrade.com also offers apps for the trader to executing trades on the go. The traders have an option to execute trades directly from the ZuluTrade.com web interface, app or by linking broker’s MT4 account via API.

Investors/customers can also execute manual trades on their accounts while it is connected to the ZuluTrade.com platform, like any normal MetaTrader 4 account. In fact, if an investor chooses to close or modify any trades opened by the traders, he or she can easily do so.

3. Tradeo

Based in Tel Aviv, Israel, Tradeo is a social trading platform developed by Hogg Capital Investments Ltd. It is backed by some of the major venture capital firms in the industry and offers its social trading as well as a brokerage service to the international market. The mother company of Tradeo, Hogg Capital Investment Ltd is a registered company in Malta and it is regulated by the Malta Financial Services Authority (MFSA).

Tradeo is registered with the MFSA as a category 2 license that allow/authorize it to provide investment service to the general public and hold and/or control clients funds or assets. However, having a category 2 license does not allow Tradeo to trade or deal. In addition, Tradeo is not authorized to act as an underwriter based on financial regulations in Malta.

Tradeo Review: Trading Services

Tradeo is a unique social trading platform as it offers its own Forex brokerage service instead of acting as a mere social trading platform for other brokers. For example, with services like ZuluTrade and MirrorTrader, copy trading investors have to sign up with one of the partner brokers then link their accounts. With Tradeo, however, everything is owned and operated by the same company that allows its customers to enjoy a better integrated and seamless copy trading experience.

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Tradeo offers two types of instruments, Forex pairs and select CFDs. With Forex, Tradeo customers can copy trades from other traders on around 65+ pairs. On the other hand, with CFDs, Tradeo offers a few select instruments such as major Indices like DutchCash, UK100Cash, Euro50Cash etc.

As far as spreads are concerned, Tradeo’s pricing for Forex pairs seems to on par with other major Forex brokers. For example, the fixed spread for EURUSD is 2.2, where more exotic pairs like GBPNZD have a spread of 3.75. In comparison, Tradeo’s spread for CFDs are a bit high, as high as 5% on HKCash. In contrast, Tradeo offers a very good level of leverage, up to 200:1 to all customers.

While it is free to open an account with Tradeo, the minimum deposit requirement is set at $100, which is reasonable. Tradeo also offers standard Demo accounts for paper trading the platform for new investors who wants to get familiar with the interface before starting trading a live account.

Tradeo Review Pros and Cons

Pros

  • The minimum deposit requirement is only $100
  • Offers very competitive leverage, 200:1 on Forex pairs
  • Built-in chat support in the Social WebTrader

Cons

  • Lacks regulatory oversight by major western financial regulators, the company is registered and regulated in Malta
  • International customers have to call overseas as phone support is only available in the UK and France

Tradeo Review: Customer Support

Tradeo offers a range of channels for offering customer support. Our research for this review revealed that besides offering phone support via dedicated numbers in the United Kingdom (+442035140493) and France (+33182882972), Tradeo also offers live chat within its Social WebTrader platform. Furthermore, Tradeo customers can visit its support system as well as avail customer service by sending e-mails to support@tradeo.com .

Tradeo Review: Trading Platforms

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One of the unique aspects of Tradeo is that the company does not rely on third party software platforms like MetaTrader or cTrader. Instead, Tradeo software engineers have spent three years developing its feature rich proprietary social trading platform called the Social WebTrader. Since the Social WebTrader is a cloud-based platform, you do not need to download or install any additional software to enjoy the Tradeo services. You can easy copy trade from any computer using a standard web browser.

Mobile Platform

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At the time of writing this Review (Nov 6, 2014), Tradeo was working on a mobile app that will allow its customers to connect and trade on the go. However, we could not find any stated deadline regarding when this app will be available for the customers.

Conclusion

At the first glance, Tradeo’s service resembles to the likes of eToro as it offers an integrated cloud based software solution as well as in-house brokerage service. However, Tradeo is not registered in the USA. Hence, it cannot accept US customers due to regulatory issues, where eToro can. However, Tradeo’s range of copy trading service, especially the feature rich Social WebTrader would be a close competitor of eToro’s OpenBook and Webtrader in the International market. If you are not concerned regarding the lack of regulatory oversight by western financial authorities, Tradeo could be an excellent option for your copy trading needs.

 

How to Start Forex trading in Kenya – 2020 Guide

Investing in speculative forex trading seems to be enjoying a great deal of popularity in Kenya nowadays. All types of media from news dailies to glossy publications are extolling the benefits of investing in foreign exchange.

Forex trading goes under a few different names. Some call it forex, others foreign exchange but for many it is simply FX.

The forex market is the largest and most liquid in the world. About $3 trillion is exchanged every day in this gigantic market which never sleeps, except on Sundays. This 24 hour trading cycle provides its own advantages, most notable of which is the elimination of overnight “price gaps” so commonplace on stock exchanges.

The forex trading market is also unique in that it is not conducted through a central exchange but on the “interbank market”. This essentially means short term borrowing and lending directly between banks on electronic networks all over the globe, rather than through a third party such as a stock exchange.

The main banking centres are Sydney, Tokyo, London, Frankfurt and New York. Since these centres are located around the globe, there is always an overlap where at least two banks are open at the same time. This is what creates the 24 trading cycle.

Different currencies are exchanged as part of the supply and demand for money used to purchase or sell local products. For example, the Australian resource boom in 2007 created a demand for Australian Dollars (AUD) because foreign countries had to pay for these natural resources in that currency. This caused a strengthening of the AUD exchange rate against other major currencies, including the US Dollar.

As one currency is exchanged simultaneously for another, it creates what is called a “cross” rate. This rate is expressed in terms of the value of one currency against the other. For example, if the AUD/USD cross rate is 0.8542 this means that for every one Australian dollar you can only buy 85.42 US cents. The most commonly traded and consequently most liquid currencies are called the “majors”. These are USD/EUR, USD/JPY, USD/CHF and GBP/USD.

The best forex trading market to focus on is called the “Spot Market” because there trades are settled immediately or “on the spot”. Other less liquid forex markets include futures and options markets.

Trading on Margin

how to start forex trading in Kenya

If you trade on margin, it means that your capital outlay is only a small percentage of the total value of the assets traded and that someone else finances the balance.

The smaller the margin deposit, the greater the remainder that is financed. So if your margin is only 1 percent it means that your dealer or broker is financing the other 99 percent of the trade value. The advantage to you is leverage, but this can also work against you.

At 1% margin you can use 1,000 units of your capital to purchase 100,000 units of currency. Your leverage is 100:1 in this case and your returns or losses correspond to the price fluctuation of 100,000 units of currency.

This is why you should not maximize your leverage (reduce your margin) too much. Whilst your profits may be spectacular, your losses could easily be more than your original capital and wipe you out. The percentage of your capital outlayed on any one trade should be a major part of your money management system.

In summary then, these are the major advantages of forex trading over other financial instruments:-

1. 24 hour trading cycle – no price gaps
2. Better liquidity – up to $3trillion exchanged daily
3. No commissions – dealers make their money on the spread
4. Margin and leverage – provided it is used wisely
5. Profit in falling markets – you have the choice how you pair the currencies – e.g. EUR/USD or USD/EUR

Finally, there are a couple of terms to be familiar with. The first is the “spread”. This is the difference between the buying and selling price of one currency, usually called the “Bid” and the “Ask”. The second concept is about “pips”. The “pip” is the smallest unit by which a cross price quote changes. In the case of a major like the US Dollar for example, one pip equals 0.0001 dollar, since the bid and ask prices run out to the 4th decimal place.

Forex brokers and dealers compete by offering tight spreads. You’ll hear offers like “only a 3 pip spread on the majors”.

You can become familiar with the above concepts by opening a free demo account with Forexyard. They provide a “virtual trading” account where you get an imaginary $25,000 and can use it to trade live prices using their state of the art charting program.

Let’s look a little closer at forex trading basics and look beyond the high praises. This introduction to forex basics will explain the risks involved as well as the realistic profit potential and how to start forex trading in Kenya.

What is Forex Trading?

Basically, forex trading is making money through the exchange of foreign currencies. Given the volatile nature of the forex market, savvy investors stand to earn good profits should they manage to buy currencies right before a jump in prices then selling as it peaks. Because of this nature, it bears some similarities to stock market trading.

An expectation that the value of a certain currency would rise or fall predictably over a medium to long period of time could make it a good investment over the long haul.

However, traders generally prefer trading within a much narrower time span. Their methods tend to focus on trading forex in shorter times with relatively modest profits on individual trades.

Often traders will open and close a trade in a matter of minutes, buying currencies they think are about to jump or selling those that they think will drop. They do this on the basis of a perceived pattern or trend that they foresee, reacting to certain predictive indicators that they track.

The profit making potential of forex trading in Kenya has steadily become more accessible to individual, non-institutional investors. Since fast internet connections are now commonplace in most homes, brokers are quick to service this new and growing market of individuals that possess modest investment budgets. Thus, trading with just a few of hundred dollars to start is now possible with the advent of forex mini accounts.

A large number of systems now exist which the new investor can utilize to educate themselves with the skills necessary to succeed in forex. Aside from these, there are also forex robots (eg. FAP Turbo Robot Software) which are automated forex trading systems. They open and close trades without the need for human intervention.

The risks in online forex trading

The dream of making huge profits in a relatively short time is common among forex trading beginners. This often results in some degree of disappointment when their dreams are not realized as quickly as they had hoped.

Forex trading demands a number of skills and a high level of discipline and control from the individual. Those who don’t possess these traits can acquire them gradually by educating themselves and through trading experience.

Keep in mind though that global events can have significant repercussions on all markets including currencies. Events such as the World Trade Center disaster can arrive out of the blue with equally disastrous effects on markets.

To protect from being wiped out by such events, traders place automatic stops on their trades. These stops are intended to close your trades automatically should market events suddenly become unfavorable. Stop orders aside, losses are a reality that should be weighed versus the promise of profits.

So while one can make a good living trading forex in Kenya, it most certainly isn’t the safest and steadiest money making option for your investment dollars.

Sit down and weigh the pros and cons, and take stock of your personal capabilities to handle the demands of the market. If you do decide that forex trading is for you, take the time to prepare yourself by studying forex trading basics at the outset.

Avoid Common Forex Trading Mistakes

To be a part of the 95% of the traders who bear losses just has to make any one of the mistakes given below. Thus to achieve success in currency trading, one needs to avoid the following.

1. Depending on Others for Success:
The common thinking trend amongst the novice forex traders is that success can be bought with the help of someone else. But even though there are a lot of individuals around to help you , no one will be able to buy success for you except yourself. To gain confidence and to be able to follow any discipline one needs to understand the logic of the system he is buying completely.

2. Forex Day Trading Functioning:
Day trading is never the thing to do, each and every short term movements are being random. The ones who are new, try day trading more with respect to any other form and get duped by exaggerating advertisement and sales copies however.

3. Scientific theory to movement of Forex Markets:
Fibonacci. The best selling courses by Gann and Elliot wave have a grand business but never tend to work i.e. for the reason if the markets functions are based on scientific theories there will not be any markets at all as there would be answers predefined for everything. Still there are people who think that there are methods of beating the market by some scientific formulas.

4. Prediction to Win:
You will never be rewarded for your predictions but will only lose on your equity if you go on predictions, as guessing or hoping seldom helps. Rather one should study the momentum indicators and trade when they are sure that the price momentum has turned their way. In such a situation the chances will be on your side as you trade on reality on the forex charts.

5. Markets Move to Supply and Demand Fundamentals:
To some extent the markets do move to the supply and demand fundamentals but trading on them isn’t possible as communication is too fast and the important news in quickly discounted in the value. Thus one can’t catch up and win on it.

The best way is to follow the charts and allow the price action to guide you as we are inspired by emotions and thus the costs don’t always move the way one wants.

Thus one needs to remember the following equation:-

Supply & Demand Fundamentals + Investor Psychology = Market Movement

6. News sources on the internet are useful:
To keep emotions away from trading one needs to avoid listening to the news, as we have already seen that the fundamentals discount immediately. Again, the news is quite at times not false and basically people’s opinions which are quite convincing.

7. Leveraging is The Factor to Gaining Profits:
Excess of anything isn’t good. In the same way excessive leveraging is also not recommended. Don’t leverage too far, one doesn’t need a 400 : 1 ,10: 1 is sufficient for most of the traders.

8. You don’t go Broke Taking a Profit:
Trying too hard to mislead a risk and giving yourself no scope of winning, a lot of traders actually create the risk. The losses will never be covered if one doesn’t run the profits.

The solution is to take calculated risks. Snatching or tightening stops too quickly wont help.

9. The More Money Put In The More You Will Earn:
Hard work doesn’t pay you in forex trading. To be rewarded one needs to be right about the trading signals.

10. Confidence & Discipline Are A Peice of Cake:
The reason why following someone else will not help you in making money is that it takes a through knowledge of the methods followed and your own emotions and discipline and self control come form this understanding. Never try to acquire them.

Learn How to Trade Forex in Kenya

So you want to learn to trade forex. Hmmmmm…

This site will teach you how to trade.

It will provide you information and links to information that will explain the trading process. The process of trading is not to be taken lightly.

Should you decide to venture upon this journey, you must know that you run the risk of losing every friend you have, your sanity, your dignity, all your worldly possessions, and most of all every penny you own.

On the other hand, if you learn to trade properly and stick to your strategy, you can make a lot of money.

Paying for Training

Keep in mind that there is a price to pay. This price is often called, for newbies, tuition. That price includes those trades where you have a loss, the hours you spend reading books and information sites on the web, the time away from your friends and family, and a change in your life style.

You’ll stay up nights doing research and you’ll pass up those get-togethers with friends at the local Kenchic.

“No” you say. Well friend, lets get something straight from the beginning. Trading is not for the weekend warrior or the midnight cowboy. Unless you are willing to put in the time to study and learn, YOU WILL FAIL!

The amount of studying and preparation that you invest will ultimately determine the level of success and the strategy that you design for yourself.

That’s right, you will design and determine your own strategy. While others will try to convince you that their methods are right or if you decide to follow someone else’s method you must always remember:

“You and you alone are responsible for your actions.
You and you alone are responsible for any trades that you make.
You and you alone are responsible for doing your own Due Diligence (research).

Don’t be so foolish as to try to blame others if a trade goes sour and you lose money. You should have gotten out of the trade before it dumped you beyond your economic capabilities.

[easy-tweet tweet=”The amount of studying and preparation that you invest will determine your success” user=”KenyaForexFirm”]

Are you a born forex trader?

Online Forex Trading in KenyaOne more note of caution: don’t let your ego get in the way of saying to yourself, “This is not for me.”

All too often, people see dollar signs in their eyes and just won’t admit that trading forex online is not for them.

If you still want to trade in online forex, you might try working with a full service broker for a few years. Some people find that a full service broker satisfies the craving. Remember, learn your limitations. Don’t be afraid to admit to yourself that this is not suited to you.

Perhaps you would be more comfortable joining an investment club in your community. If so, visit Investment Club Central.

Ok, I know, enough already.

Well, the reason we started this site was because we would see, and still do see, people everyday losing everything. We want to make sure that prospective forex traders in Kenya are aware of the risks involved with trading.

Also, for those of you that are really sure that you want to go on, then, at least you are armed with a wealth of resources where you can study, research, practice and chat in your pursuit of learning to trade.

Don’t be foolhardy. Trade with only those funds that you can afford to lose. Don’t use your savings, retirement plans, school tuition, etc. Be cautious, learn to trade on paper first.

Perhaps before going much further, you should read some comments from some of the chat rooms on starting to day trade for a living. As in any job, there are pros and cons. Read between the lines and learn to separate the hype from reality.

Perhaps self study is not for you. Are you one of those people that learn better in a classroom? If so, we can definitely say the Online Trading Academy is one of the best. Their 1 week boot camp is a real good way to jump start your entry into trading in the markets.

What is Forex?

The Foreign Exchange (FOREX) market is by far the largest market in the world. The $4 trillion average daily turnover dwarfs the daily turnover of the American stock and bond markets combined.

There are many reasons for the popularity of foreign exchange trading, but among the most important are:

  1. The available margin trading
  2. The 24-hour a day 5 days a week liquidity
  3. And low if any commissions.

Of course many commercial organizations are participating purely due to the currency exposures created by their financial institutions accounts on their import and export activities.

Investing in foreign exchange remains predominantly a domain of the big professional players in the market such as hedge funds, banks and brokers.

Nevertheless, any investor with the necessary knowledge is and complete understanding of this market can benefit from this exciting arena.

What is Currency Trading

Currency trading is done, when a trade off is made against the strength and weakness of two or more opposing currencies. For example the currency trading of the Euro against the US dollar or that of the Japanese Yen.

In order for a Forex trader to be successful in currency trading, he needs to look at the market trends and try to analyse where and in what direction he might think that the market is going to go.

There are many factors which can (and do) contribute to the daily currency trades being made, and these can have almost immediate effects to the currency trader. In the world of online forex  trading such factors could be:

  • The outbreak of war
  • Natural (sometimes called Acts of God, in insurance terminology) disasters such as hurricanes, earthquakes, typhoons
  • Secessions and the breaking of trade blocs as recently witnessed with Britain’s exit from the Euro bloc (Brexit)

All these factors impact directly on the supply and demand of currencies and commodities. For example, war could interfere with the supply and delivery of crude oil. Terror acts also play a role in currency trading. Although, traders today, and after 9/11 tend to take such things more in their stride now, and the currency trading markets usually correct themselves pretty quickly today.

In internet forex trading, an exchange rate represents the value of one currency against that of another. An exchange rate fluctuates over time.

The US dollar is the most traded currency in the world and we can look at the value relative to a third currency, which may be obtained by dividing the US dollar rate for that of another.

For example, if there a 120 Japanese yen to the dollar and 1.2 euros to the dollar, then the number of yen per Euro is 120/1.2 = 100.

The magnitude of numbers is not, by themselves, indicative of the strengths or weaknesses of any particular currency. Meaning that the US dollar could be rebased tomorrow, so that one new dollar was worth one hundred old dollars.

All the numbers, in the table, would be multiplied by one hundred – this does not suggest, however, that all the world’s currencies just got weaker. One way or another, currency trading is almost as old as mankind itself.

What is Margin Trading?

Foreign exchange trading is normally undertaken on the basis of margin trading or gearing.

A relatively small deposit is required in order to control much larger positions in the market. This is possible because when you buy one currency you sell another.

Margin requirements are set by your broker and vary from as little as 1% to 10% margin.

This means that in order to trade 1,000,000 USD on 1 % margin, you need to place just 10,000 USD by way of security.

That same security of 10,000 USD, traded on a 10% margin could control up to 100,000 USD worth of one currency against another currency.

Demo and real accounts. Why a demo account? What’s the difference?

For every experienced and successful forex trader, there is a plethora of new and/or inexperienced would-be traders out there. We strongly recommend, especially for the novice trader, that you start by using a demo account.

Why?

Simply because it eases you into the world of real forex trading without financial risk to yourself, because you are, in effect, using an entirely virtual money account.

With a demo account it does not matter to you nor anyone else if you happen to lose a fortune on your first trade. You can always open another demo account or ask your broker to top up the accounnt.

Moreover, it gives you time (over how ever long-a-period you feel you need) time to play with all the brokers facilities and become orientated as to how online forex trading really works and can, in fact, work for you – to your advantage.

A demo also gives you time to realise what type of a trader you are and allows you to develop your own trading strategy. In a nutshell, it gives you the time to develop your wings.

Finally, whether or not one is seasoned trader, when using a new Forex site, for the first time, it is our strong recommendation that one should always become acquainted with how each and every Forex site works, by using the site’s demo trading platform – in order to understand exactly how the site’s software works.

What’s the difference?

Simply put, apart from (as mentioned above) you are using virtual money the difference is virtually unnoticeable – all the features are exactly the same, as in the real account.

The only difference being is that your PC is your dealer, which will always open or close your positions automatically – in accordance with the current market rates. In real trading, it is done manually, by one of our traders.

  1. In demo trading, with the benefit of no risk, should you use up your initial credit, you can easily top this up. Simply go to our user zone with the help of your account and password (Section “Demo Account”).
  2. There are almost no delays, between your inquiry and offer of the exchange to open or close a position. However, in real trading there could be delays of 30-40 seconds.
  3. Rubbish quotes (these are single bounces for more than 30 or more pips from current quotes) are accepted by the PC as real ones on a demo account – participating in the quote system. In a live account they are ignored.
  4. With a real account, it could happen that there is market movement, whilst you are in the middle of closing your position, in line with a certain rate. Should this be the case, your order might not be fulfilled. Hence you will be in receipt of an order to close the position at another (current) market rate.
  5. We believe that there are or can differences, in psychological make up, when a player is using virtual money and real money. It is important not to get carried away, when using a demo account, and not to forget that you are there to study and make good on your real objective – of preparing for the day, when you decide you want to try and spread your wings and fly and become a fully-fledged trader; with the objective of using real (your) money, with the sole objective of making more money, via way of return.
  6. You should be aware of the fact that the market is always moving and sometimes very quickly. An exchange rate are by nature, very changeable and subject to world events and breaking news and it is possible for rates to leap either up or down by several pips on breaking news stories. The speed at which you enter your order into the system may influence the rate according to which you can enter the market. This is one of the many factors that influence the results of your trading.

We strongly advice that you learn, develop and trade the market using a planned forex trading strategy- one that works the best for you.

Remember, there is no one plan which fits all. We are all individuals, and what might work rather well for one person, does not mean that it will work well with you. You should also consider what are the up’s and downs of the loss you can stand.

In essence we cannot stress enough, the importance of having a plan and following that plan. This does, however, call for a rather ruthless approach and it is all too easy, for the human emotion to kick in.

However, the other thing is that with real trading, you are using real money and it could be those very human emotions, which could also stop you from making a good kill. Therefore you need to be able to temper your emotions with the cold realisation of the hard facts of what all the indicators/signals are telling you.

Our demo version will give you all the tools and the time necessary, preparing you for the day when you will be ready to take your first flight, into the real world of Forex.

We wish you good luck. As usual, you should always be aware that there is the potential for loss as well as very attractive gain.

Forex trading training in kenya

For convenience sake, let’s say that you’re studying the EURO and your trading strategies are telling you that the prices will rise or rally, during a given time frame. You buy the EUR/USD pair or, technically speaking; you will simultaneously buy euros as the base currency and sell dollars.

So, you open up your trading platform, which is usually provided for you free by your online forex broker, and you then see that that the EUR/USD pair’s are trading at EUR/USD: 1.3242/45, for example. It is important to remember that the quote (1.3242) on the left, is the bit or “sell” price, which you obtain, when in USD’s when you sell EUR’s. the quote, on he right (1.3245), is used to obtain the ask or the “buy” price, which is what you have to pay in USD if you buy EUR.

Based on the belief that the market price for the EUR/USD pair will climb, you then enter a “buy position” in the market. Simply put, let’s assume that you’ve bought one lot at 1.3245 and as long as you sell the pair at a higher price; then you’ve made some money.

This seemingly complicated process is handled and calculated for you, via your broker’s software and trading platform. The charts and quotes board software should be in agreement with all currency sides.

Let’s have a look at this type of scenario, involving the USD/JPY currency pair. Remember, selling (“going short”) the currency pair implies selling the first base currency and then buying the second, quote currency. If you believe that the base currency (USD) will go down, relative to the quote (JPY) currency or, equivalently , you believe that the quote (JPY) currency will go up, relative to the (USD) base currency, then you sell or “go short”.

NOTE: while the Profit Calculations, on the Short-sell trade scenario below, may seem somewhat complicated if you’ve never been in the FOREX market before, trust us when we say, “this process is nearly seamless through your broker trade station (software). We’re just showing you this thought-process below so you can SEE how a PROFIT occurs even when. also view Forex Education.

Selling a Currency Pair. The current bid/ask price for USD/JPY is 105.26/105.30, meaning you can buy $1 US for 105.30 Japanese YEN or sell $1 US for 105.26 YEN. Suppose you decide that the US Dollar (USD) is overvalued against the YEN (JPY). To execute this strategy, you would sell Dollars (simultaneously buying YEN), and then wait for the exchange rate to rise.

So you make the trade: selling US $100,000 and purchasing 10,526,000 YEN. (Remember, at 1% margin, your initial margin deposit would be $1,000.). as you expected, USD/JPY falls to 104.26/104.30, meaning you can now buy $1 US for $104.30 Japanese YEN or sell $1 US for 104.26.

Since you’re short dollars (and are long YEN), you must now buy dollars and sell back the YEN to realize any profit. You buy US $100,000 at the current USD/JPY rate of 104.30, and receive 10,430,000 YEN. Since you originally bought(paid for) 10,526,000 YEN, your profit is 96,000 YEN.

To calculate your P&L in terms of US dollars, simply divide 96,000 by the current USD/JPY rate of 104.30. Total profit = US $920.42.

In a nutshell forex trading is really just that – foreign exchange currency trading, which today we know as Forex.

The forex market found popularity in the mid nineties and has gained in sophistication and momentum since then. It has become something of an immeasurable entity, with millions going online to trade on the forex market on an almost daily basis.

As a result, the forex market now trades billions of dollars, pounds, or whatever currency you care to name twenty-four hours a day, and the only time it’s closed is at the weekend.

However, worldwide time differences, mean that the shop, which is forex, is hardly ever closed. Therefore, the forex market is not a fixed, physical, entity.

And here is the difference between online currency trading and a physical trading market place like say, the New York Stock Exchange, The City of London, or the Tokyo Stock Exchange, where the traders are limited to the trading hours of these places.

In contrast, the world of the internet forex trading has no such limitations. The internet market permits one to trade from anywhere there happens to be an Internet connection; be it from home, an Internet cafe, or even from one’s work place, in the office.

There are numerous online currency trading platforms, from which to choose from, and it could be said that each online currency trader, has his/her favourite. For those new to forex trading, however, the choice should be made with care, and it is always advisable to try the various “demo” versions as fully as possible.

It must be said, thought that as well as having the possibility to make and take profit(s) from on-line currency trading, it is also possible to incur losses as well, so be careful and never spend more than you can easily afford to lose.

In Summary

Internet forex trading is purchasing one currency, for another, with the view of making a profit against the weakness of the currency one’s purchasing.

However, because the market can change within the wink of an eye – one has to have an agile mind, confidence, and to possess awareness of world and up to the minute financial affairs.

The online forex market can and will have sharp reactions to terrorist acts, for example and/or acts of God, for example hurricanes, which could upset crude oil supply and delivery.

And, although the markets now readily adjust to such affairs these days; the sudden drops and spikes, as a result, very often could and do, take one by surprise, nevertheless – even the most experienced of traders.

An average of $1.9 trillion is traded on Forex market daily, thus making it the world’s biggest market, and although anyone can now join in on online currency trading, the biggest players – day in day out, are the banks, which range from commercial to investment institutions as well as, registered, futures commission merchants.

How to start earning from forex trading in kenya

Forex trading in Kenya has in the last ten years taken off as a result of penetration pf internet. Unlike the years gone by, almost every Kenyan has access to the internet.

Additionally, the options and trading applications and platforms, now on offer from the abundance of web sites promoting their services – quite literally spoils one for choice.

But what is Forex trading?

Forex trading in its simplest form is trading one currency against another currency. Traders profit from the fluctuations in the value of the different currencies.

The internet forex trading of today can be traced back to the time when man first started trading one or several items in exchange for others. This was and is known as bartering and that’s how things continued until the introduction of money.

The origins of the word money stem from the Latin word, “moneta,” which in turn comes from the Greek temple of “Hera the Moneta.” And this is where money first came from, in the early days of Rome.

Money, in itself, must be a scarce good and many items have been used as money, from naturally scarce metals and minerals, to conch shells and cigarettes, to artificial banknotes; i.e. paper money.

Money is, in its crudest form, a token – an abstraction and perhaps the most popular of that is the form of paper money, in the design of banknotes, which is the most common sign of physical money. Gold and silver retain, however, many of the essential properties of money. An example of cigarettes, being used as “money,” may be found in many prisons, where the usual forms of coins and notes are prohibited, from being held by their inmates.

Bartering, however, has several problems, most notably timing constraints. If you wish to trade fruit for wheat, you can only do this when the fruit and wheat are both available at the same time and place. That may be a very brief time, or it may be never. With an intermediate commodity (whether it be shells, rum, gold, etc.) you can sell your fruit when it is ripe and take the intermediate commodity. You can then use the intermediate commodity to buy wheat when the wheat harvest comes in. Thus the use of money makes all commodities become more liquid.

Forex trading is where (as already mentioned), one currency is bought and sold against the fluctuation rate of that of another, on the international currency exchange market, with the idea of selling one currency against the other for profit. Money has always been traded, through the centuries. However, this was, until the advent of the Internet; usually the exclusive domain of the rich and that of their brokers. Before the Internet, anyone wishing to make a currency exchange, went through an agent, known as a broker, who bought and sold, at what he thought were the best rates of exchange. For this, they extracted a fee, unusually via of a percentage of the total sum of the deal.

The forex trading market I always in a continuous state of flux due to the continuous rates of variability on the foreign markets and this as a direct result of supply and demand and, amongst other things, domestic stocks, and international trade patterns, tendencies, and movements.

Today, with the richness and abundance of the Internet, anyone can become their own forex trader, from the comfort of their own home, start trading and stand a good possibility of making money, after a little trail and experience.

Forex trading, on the Internet really started to take off, in the mid-nineties and at that time there were only a handful of web sites, with (in comparison to today’s usage) a handful of people. These people started trading from home, during the day, and rapidly became known as Day Traders and all of this really got started in the US. For many forex trading even became a way of life, with many giving up their regular jobs, and making money for themselves, in real time and at home.

With the advent of broadband, with good and secure high speed connections becoming a forex trader is not difficult and simply requires a degree of understanding of how the markets work, spotting what the tendencies are and making a trade on what you think is going on in the forex market. Forex trading is no longer the exclusive domain of the rich and their brokers – rather it there to be used by one and all, with a degree of intellect, and an aptitude for spotting market trends, and making a trade on what he or she thinks will happen to that currency next.