How to make your own people-based portfolio
Social trading makes it easy to share information and achieve investment success by viewing, following and even copying trades made by expert traders. The massive volumes of data that social trading provides can sometimes make it difficult to know which traders to trust, and how to find the relevant information inside the ocean of live trading action. The following tips will help you identify the traders that can provide the expertise you need to improve your trading performance.
1. Sort traders by risk levels – This will enable you identify expert traders that have a trading style similar to yours, and whose trading actions will be more relevant to your own portfolio .
2. Check out the trader’s following–By browsing through the guru's personal profile you can check out the number, diversity, and success of the gurus' followers. This will show you how profitable it is to follow a particular trader.
3. Evaluate the trader's portfolio – A long-term trader with low risk levels and consistent profits may seem like a safe bet, but if this trader only trades one currency or commodity,his/her portfolio is more vulnerable to sudden market swings.
4. See how your guru compares with others–When checking out your guru’s portfolio, it’s a good idea to see how your guru stacks up against other traders who make similar investments and have similar trading styles. If there’s someone better out there, why settle for second best?
5. Analyze your guru's performance – Current statistics don’t always show the full picture, so you should always see how your guru has performed over time. Has your guru been constantly improving? Or is his P/L curve full of peaks and valleys?
6. Stick close to home –A guru that lives in your time zone and speaks your language is more likely to be open to communication. Or if you follow a certain currency in particular, you may want to pick a guru with a local connection to this currency. For example,a Canada based trader may be more aware of local public policy that can affect the value of the loonie.
7. Evaluate sociability- A guru that interacts with his/ her followers can be much more helpful to you than someone who prefers to keep quiet. You can also evaluate the quantity and quality of their feedback from the followers’ responses provided. This will show you of how likely the expert is to share tips and tricks.
8. Bring diversity to your people portfolio –Just as you’re advised to diversify your investment portfolio, it is best to minimize risk by following a wide range of traders. It is recommended that your portfolio contain a minimum of five experts so that no one trader can sink your balance.
These are just some of the basic tips you can apply to social trading. The best part of social trading is that it gives you access to an unlimited database of trader generated information 24/7. Who you follow, how you interact, and how you invest is entirely up to you.
All you need to do now is start building your own people-based portfolio with the click of a mouse and this is easy, especially when using eToro’s online trading platform!