The idea of copy trading is simple: use technology to copy the real-time forex trades (forex signals) of other live investors (forex trading system providers) you want to follow. This way, every time they trade, you can automatically replicate (copy) their trades in your brokerage account.
Truth is…Trading is not easy
Studying the market takes time. Building and maintaining a trading strategy is hard. That’s why only 11-26% of manual investors end up winning.
Notably, while social trading is not a new concept as it was used by many traders for several decades – it has emerged as a vital tool to investors when the internet became accessible. eToro was one of the first social trading platforms in the market that started operating around 2006. Other famous social trading platforms that have emerged since then include NAGA, ZuluTrade, and Duplicate.
What is copy trading?
It’s all in the name! Copy trading allows you to directly copy the positions taken by another trader. You decide the amount you wish to invest and simply copy everything they do automatically in real-time – when that trader makes a trade, your account will make that same trade as well.
You do not need to have any input on the trades, and you get the identical returns on each trade as your chosen trader.
Copy trading is one of the easiest ways to use another trader’s expert knowledge. It also means that you don’t lose any control over the outcome. You still have the ability to close trades, and open new ones when you want.
But by copying another trader, you could potentially make money based on their skills.
In fact, no advanced knowledge of the financial market is required to take part!
Benefits of Social Trading
Trading on a social trading platform is a fascinating way to approach the markets. Below, we’ll give you the top reasons why social trading can be beneficial on your journey to create a profitable portfolio.
- Unlike traditional trading platform, social trading networks are much more fun to use
- Free flow of information from other users
- It is extremely easy to use
- Copy Trading – Social copy trading enables you to trade the markets without having to spend time on research and trading in front of the computer
- You get to interact with other members of the network and share trading ideas
- Removes the tension and stress of self-trading
- Risk management tools – In some of the social trading platforms available in the market, you can choose the risk you’re comfortable with.
Copy trading is the act of copying trades of other traders. Some copy trading platforms enable traders to copy another trader and echo success.
They pick a trader from the leader board where every trade the person makes goes into the traders’ account.
Restrictive controls monitor the accounts, so they don’t follow someone blindly. But still, the overall responsibility is in the trader.
Copying is a quicker way to trade without the concern of making choices as they all need to do is choose the trader that seems to be the best and copy it.
Sharing information and learning from the best is just the first step in social trading. In time, you can copy traders (a process called copy trading, which we will explain in the next section), as well as work with other like-minded in a group for a mutual benefit. You will learn, trade, create new friendships and make money. Social trading opens the door to endless possibilities. It significantly shortens the learning curve from a beginner to intermediate level trader. Before you know it, you will be able to make your own trades and even help newbies on their journey to becoming traders.
So, in simple words, Social Trading is the activity to learn which strategies work, which are not, with an opportunity to duplicate or become an expert while all brought by a very attractive cost, with the only payment a small markup on the successful trades.
The Risks
The main risk with copy trading is an obvious one – you are taking part in some risk with financial implications. Trading by its nature is a high risk, high reward endeavour.
Market risk
copy trading, like with any trading in financial markets, involves putting some of your capital at risk. Inevitably, the market risk associated with this means you can lose that capital as the assets your chosen trader has bought and sold may be prove unsuccessful.
Trader Histories
choosing a long-term reliable trader to copy can be difficult. It is up to you to do your own homework to make sure you understand your chosen traders. Sometimes, results can be too good to be true, or a trader is going through a hot streak which means a drawdown is close by.
Execution risk
as with any financial trading, there is risk involved if the assets being traded are illiquid i.e. how easy is it to exit the positions held. You also need to be aware of other areas like what costs are included in the copy trader’s returns and is the bid/offer spread already included in published returns.
Social Trading Concepts
The social trading sector features four distinct sub-sectors, catering to various demands of social traders.
Mirror Trading
It allows traders to copy a strategy rather than a trader. More advanced traders use it. Mirror trading requires more capital amid high trade frequency in a fully automated environment.
Copy Trading
In copy trading,Copiers will select a trader to follow and duplicate all trades.
Social Trading
Traders will discuss and share ideas, but trade placement is manual.
Signals & Tips
Many traders publish them free of charge, brokers offer them, and paid-for signal providers also provide them. It is manual trading without interaction between traders and followers.
- Get More Followers in Social Trading and Copy Trading
- Is Online Social Trading for Me?
- Make Money By Copying Top Traders
What is the best social trading platform?
What is the best social trading platform?
The best social trading platform features a large and active trading community with competitive research tools.
What is a social trading platform?
A social trading platform allows traders to interact, share ideas, copy trades, and discuss financial markets.
What does social trading mean?
Social trading usually refers to copy trading, where members in the community follow traders in an automated trading environment.
What is social trading in Forex?
Social trading in Forex allows followers to copy other traders and participate in markets without learning how to trade. Following traders at one of the best social Forex trading platforms will improve the results.
Is social trading legal in the US?
Social trading is technically legal in the US, but almost no brokers offer it to US persons due to problems making social trading work with US laws mandating FIFO (first in first out) and banning hedging.
How do you use social trading?
You find traders you have faith in, then set your social trading account to copy their trades. Ensure you limit risk and diversify between a range of traders. Finally, monitor the results and be ready to “fire” traders who are not performing as well as you expected them to.
