Social Trading vs Copy Trading: Which Strategy is Worth It?

Now that you’ve read this article, you are almost ready to put this knowledge to the test. You can test your skills using a Libertex demo account to try different techniques before you begin live trading. A Libertex demo account allows you to try the statistics without risk.

IG International Limited is licensed to conduct investment business and digital asset business by the Bermuda Monetary Authority. Although the signal service gives you detailed research, you are still making the decisions and retain full control https://xcritical.com/ over your trading.1 This means that you can fit the trading strategy to your needs. One of the most successful copy traders on eToro is Jay Edward Smith. The UK-based trader made gains of 52% and 103% in 2019 and 2020 respectively.

Why Is Social Trading So Popular?

77% of retail investor accounts lose money when spread betting and/or trading CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money. On the other hand, social trading, as our brief timeline above indicates, has existed for decades. And we’ve deliberately chosen our starting point at a moment in history when investors started to enjoy relatively easy internet access in the 1990s. For as long as people have traded, they’ve been doing it socially, and this reaches all the way back into the earliest days of human bartering and investing. If it weren’t profitable, then people wouldn’t continue doing it.

When we explored the fee department, NAGA offers commission-free trading on forex, crypto, indices, commodities, and futures. However, there is a variable commission charged on stock CFDs and ETFs. There are numerous different indicators that can help you when choosing which accounts to follow on a social trading platform. These include profitability, active account duration, maximum drawdown & more. All material presented within this website is not to be regarded as investment advice, but for general informational and educational purposes only.

Social trading app

Social trading enables you to replicate the buy and sell strategies of other traders. Although this can reduce the amount of preparation you need to do, it could also mean you become out of your depth quickly. And there is no guarantee that the third party you have chosen to copy has done the appropriate amount of analysis either. Social trading may potentially also change how much risk investors take.

Social trading networks are seen as subcategories of online social networks. Please ensure you understand how this product works and whether you can afford to take the high risk of losing money. It is important to remember that social trading platforms are still brokerage firms. That is to say, they give you access to the financial markets, and thus – reputation and trust are crucial. This is why the best social trading platforms are heavily regulated by reputable financial bodies. We have come across social trading platforms that allow you to copy other traders using the site.

How many Signal providers can I follow at the same time?

With that said, the most attractive and perhaps innovative social feature offered by eToro is that of its Copy Trading tool. This takes things to the very next level, as you can copy an eToro trader like-for-like. There are thousands of verified eToro users that have joined the Copy Trading program, so you find an investor that meets your financial goals and appetite for risk. There’s heaps of data to draw from too – such as past performance, historical trades, risk profile, average trade duration, and preferred assets.

• First and foremost, you need to check how ‘social’ your chosen platform is.
• Social trading differs because not all types of social trading allow someone else to manage your trades.
• As a result, traders can immediately and efficiently get information.
• For example, eToro allows you to see what your fellow traders are speculating on once you click on an asset.
• Social trading can serve as verification for other types of analysis by observing market sentiment and other traders’ activities.

Moreover, we are social beings, and so it’s only natural that we invest via social trading platforms. Founded in 2000, Collective2 started offering traders a mere three years later the option to follow trading systems created by other traders, as the screenshot from their website demonstrates. In other words, Collective2 preceded ZuluTrade by four years in terms of offering social trading functionality to retail investors. Remarkably, we’re still using the same language and approaches to social trading that the earliest social trading platforms used twenty years ago. As its name implies, social trading involves a community of traders, rather than one single trader, the goal of which is to harness the “wisdom of the crowd” for everyone’s benefit.

What are the risks of social trading?

Social trading is a form of investing that allows you to copy investment strategies from others. It’s suitable for people who don’t want to invest too much time to find good trading opportunities or strategies. Forex — the foreign exchange market is the biggest and the most liquid financial market in the world.

The fund manager of a PAMM account enables proportional trade allocation to all combined sub-accounts based on balances, equity, or margin level. In this situation, a fund manager may divide what is social trade trades among sub-accounts based on lots or equity percentages. In comparison, MAM offers a variety of allocation strategies that let traders set the level of risk they want to take.

Allows Investment with Little Market Knowledge

Learn more about how Social Trading works and if it’s right for you. Social trading apps bring community and interaction to the world of investing, but there are a lot to choose from. First-in, first out is a rule that requires traders to liquidate multiple positions of the same asset in the same order they were taken, starting with the oldest first. Users can follow other traders who are ranked by performance, stability, behavior, and outlook.

IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.