Social trading is the social network for traders with an extra benefit that allows some of them to copy others' strategies. Let's find out the 8 platforms with the best service in social trading.
Social trading was first introduced in the form of mirror trading in the early 2000s. Parallel with the rise of social media, the social trading softwares, platforms, and brokers had taken off since then and are thriving today thanks to their ability to connect traders around the world. Platforms like eToro and ZuluTrade are now the leaders in this hugely popular trading segment.
- What is Social Trading?
- Best Social Trading Platforms
- Is Social Trading Legal?
- Does Social Trading Work?
- Risks of Social Trading
- How to Benefit the Most from Social Trading
- The Pros and Cons of Social Trading
- Final Words
What is Social Trading?
Social trading is a form of trading that allows traders to interact with each other. This interaction enables traders to share trades, ideas, or news with their fellow traders. It is very much similar to social media, but with trading as its focus. Additionally, traders are allowed to copy from other traders' strategies so it can be a meeting point for traders looking for signals and those seeking extra commissions by sharing their ideas.
The Difference between Social Trading, Copy Trading, and Mirror Trading
Copy trading and mirror trading can be seen as narrower forms of social trading. Social trading platforms typically allow copy trading. This feature is very useful to beginners with little experience as they can directly engage in trading by copying the trades from experts. The platforms will automatically copy the trades by the experts (making them the providers) and apply them to the accounts of the followers who have opted to copy the trades. eToro, ZuluTrade, and NAGA Market are some of the best platforms for copy trading.
On the other hand, Mirror trading is more fixed than copy trading in its operation. Traders open and close positions automatically at the same time as the traders whose trades they mirror, with pre-coded trading signals and strategies. This type of trading focuses more on Algo-trading and automated trading. Tradency is the pioneer in mirror trading and still continues to offer this feature to this day.
Criteria of a Good Social Trading Platform
As already mentioned before, most social trading platforms enable copy trading. Thus, we have compiled a list of parameters that make a good social trading platform based on its copy trading functionality. All in all, good social trading platforms seek to deliver the best trading experience for providers and followers.
- Reliability and Ease of Use
It is a very simple yet critical factor when you choose a social trading platform. If the platforms are unstable and constantly have technical errors, it is wise to avoid them. Good social trading platforms should be fast and easy to use.
- Support and Social Functionality
Customer support is another essential factor that good social platforms must have. Fast and quality support can be the difference between winning and losing trades. Social functionality here refers to the possibilities of interaction between providers and followers, whether in the forms of forums, comments, or ratings. Good social platforms will have big and active communities where traders can gather to discuss trading-related topics.
- Selection of Providers
Choose a social trading platform that gives you the ability to select multiple providers to copy. The more the providers, the more varied the trading strategies. Still, it is not only about the number of providers but their quality as well. Good platforms will have providers who risk their own money and have positive track records in their trading activities.
- Ability to Display Performance Analytics
Choosing a provider to follow can be an overwhelming task. That's why good social trading platforms will provide an analytics setup that allows you to analyze the providers. The most commonly used performance metrics to choose the best providers are as follows.
- Risk Score: measures the level of risk of a provider's trading performance, whether his style is aggressive or conservative.
- Profit Graph: visually represents a provider's growth in gaining profits. Graphs with sharp rises and falls indicate the application of excessive risk, and graphs with 45 degrees of rises indicate a balance between risk and profitability.
- Profit per time: Providers who win trades more consistently in the long term are more reliable and record a higher score.
- Drawdown %: measures how negative a position can be before it turns positive. The drawdown of good providers should not exceed 10% of the account.
Best Social Trading Platforms
We have learned the criteria of good social trading platforms. Now, let's find out the eight social trading platforms that stand out in the industry
ZuluTrade is the game-changer in the financial market when a Greek entrepreneur called Leon Yohai launched this social trading platform back in 2007. ZuluTrade started off with the autotrading feature, but over time it continued to expand the social trading service.
Offered on its own proprietary web and mobile devices apps, ZuluTrade also supports multiple brokers. Social interaction capabilities are available on this platform, but copy trading sits as its mainstay.
The followers are provided with a vast selection of quality providers which can be searched and selected with professional and advanced search tools. With its algorithmic Trader Combos feature, a follower is given the ability to combine and copy the strategies of multiple providers.
There is also the Social Charts feature, which shows the definite entry points placed by providers, as well as their recently closed positions. Overall, ZuluTrade is the best social trading platform in the market, and you can try the platform for free with a demo account.
See Also: Brokers Providing Demo Account
Islamic accounts available
US traders are welcome
eToro established in early 2007, with a mission to make trading accessible to anyone, anywhere, and reduce dependency on traditional financial institutions. The company has head offices in the United Kingdom, Cyprus, USA, and Australia.
eToro (Europe) Ltd operates as a Financial Services Company authorized and regulated by the Cyprus Securities Exchange Commission (CySEC) under license no. #109/10. Meanwhile, eToro (UK) Ltd is authorized and regulated by the Financial Conduct Authority (FCA) under the license FRN 583263.
As for eToro AUS Capital Pty Ltd, the legal standing is acknowledged by the Australian Securities and Investments Commission (ASIC) to provide financial services under Australian Financial Services License 491139.
A broker that belongs to the 4-digit type, eToro offers both short-term options for day traders and long-term options for investors, such as their innovative CopyPortfoliosTM, a fully managed thematic portfolio.
Since 2007, eToro has been at the forefront of the Fintech revolution. The most recent was launched in 2017, which is CopyPortfolios powered by Machine learning Al. Beyond developing CopyPortfolios, the company integrated Microsoft's machine learning technology into Momentum DD.
The new CopyPortfolio investment strategy uses artificial intelligence to find the steadiest traders who are most likely to generate a double-digit return and bundle traders into one fully-managed portfolio. eToro has hundreds of financial assets for trading across several categories including stocks, commodities, crypto assets, currencies, indices, and ETFs. Each asset class has characteristics and can be traded using a variety of investment strategies.
Some positions on eToro involve ownership of underlying assets, such as non-leveraged positions on stocks and cryptos. Employing CFDs will enable a variety of options, such as leveraged trades, short (sell) positions, fractional ownership, and more. For example, traders can invest as little as USD100 in gold, even if a single unit of gold cost USD1,000. Some of eToro's most popular CFD commodities include gold, oil, natural gas, silver, and platinum.
Currencies are traded on eToro only as CFDs. Also, CFDs enable Sell (short) positions and leveraged trade, even for assets that don't offer the option in traditional trading. Some of the popular currencies include EUR/USD, GBP/USD, AUD/USD, USD/JPY, and USD/CAD.
Furthermore, An Exchange-Traded Fund (ETF) is a financial instrument comprising several assets grouped to serve as one tradable fund. After opening an account in eToro, traders can invest as little as USD250 in an ETF that costs USD500. Some of the popular ETFs on eToro include SPY, VXXB, TLT, and HMMJ.
However, eToro also offers additional functions using CFD trading. All leveraged ETF positions in the UK are under FCA regulations. Meanwhile, all CFD positions executed by eToro Australia are under ASIC regulations.
The company has other advantages. In all financial assets that can be traded, eToro does not charge any deposit or trading frees other than spreads.
eToro charges a USD25 fee for withdrawals and the minimum withdrawal amount is USD50. Long (Buy), non-leveraged crypto, stock, and ETF positions are not executed as CFDs and do not incur any fees. eToro does charge overnight or weekend fees for CFDs positions, such as leveraged positions and short (sell) orders.
Fee updates always apply to open positions. Fees are subject to change at any given time and could change daily, without prior notice, depending on market conditions.
As a beginner, trader can use CopyTrading eToro. Different from the features of other brokers, traders can copy the strategies of professional traders without fee or profit-sharing. Therefore, 100% profit is fully owned by traders. For example, while trader A who is copied by trader B, produces a profit of 10% this month, then trader B also gets a profit of 10%.
The company is the world's leading social trading network. Since eToro operates in complete transparency, each trader has valuable information on their eToro profiles, so other traders that are interested to copy their trades can have assistance in creating their best portfolios.
Another feature that is unique to eToro is the personalized, social News Feed. Just like on any social media, traders can post their updates on feed, comment on other's posts, and gradually create a feed that is tailor-fitted to trader's trading and investing interests. On eToro social trading platform, traders will also get notifications when a trader writes a new post and many other important updates.
eToro may not be the one that kick-started the social trading trend, but it is certainly the company that gives prominence to the whole thing. eToro social trading was initially founded by Yoni Assia, Ronen Assia, and David Ring in 2007. Today, it has been amassing more than 13 million registered accounts.
This platform allows you to monitor what others are trading in real-time and manually copy their trades. Obviously, automatic copy trading capability is also available. eToro's proprietary copy trading platform will automatically adjust your copied trade to proportionally match your fund, thus enforcing risk management. Full demo account functionality is available for free, so beginners can experience how copy trading works. In fact, eToro is a platform that focuses on educating beginner traders.
As for the trading instrument, eToro focuses on stocks copy trading with 0% commission rather than currency pairs. In fact, they offer forex as CFD assets that clients can trade in their proprietary platform.
FxStat is a reputable social trading platform that has been amassing more than 250,000 users. When first established in 2010, this platform was a forex analytics provider for traders to analyze and compare their own trading performance. Since then, the copy trading and autotrading functionalities were added to the platform.
FxStat is offered on the web and mobile devices with its iPhone and Android apps. FxStat allows you to connect your MT4 trading account, provided that your broker presents you with the option to do so.
In the performance metrics, FxStat displays whether traders use manual trading or automated systems. The social trading community comes in the form of discussion boards where traders can connect with and follow each other
Myfxbook is perhaps the best choice for those who seek a huge and active social trading community. This platform allows providers to connect their trading accounts and share their live trading signals for the community to discuss. Not every provider can do this, though. Thanks to its strict procedure, Myfxbook selects only the best traders to provide signals to be copied.
This platform will pay incentives to providers, but only for profitable trades. This system ensures that only the best signals are provided on the platform. In addition, you can use autotrading capability after connecting the platform to your MT4 account. Myfxbook currently supports more than 100 brokers.
FXJunction is one of the most followed social trading platforms out there. This platform allows you to create a social trading portfolio by combining and copying successful trading strategies into your MT4 or MT5 trading account.
Since FxJunction doesn't work with any brokers, you are free to link your existing MT4 or MT5 account. Also, providers are free to structure their own fees. One of the useful features of FxJunction is the Leaderboard where the trade stats of providers are displayed.
With this Leaderboard, you can see which provider is the most profitable and use the AutoCopy feature to activate copy trading. Providers with negative returns are usually not put into display, and neither are providers with 'unusual' positive returns; in which the profits are commonly generated through the application of excessive risk. FxJunction wants to ensure that the followers do not implement overly aggressive methods, thus aiming for sustainable profits.
MyDigiTrade was initially created in 2010 for mirror trading but has since added copy trading and social interaction aspects such as comments and ratings. This platform is for the forex market only, so all the signals provided are tailor-made for forex traders.
Free forex demo accounts are available, so you can experiment before investing real money. You can integrate this platform into your MT4 trading account from any broker. The funds of followers are allocated safely in this platform as their trading volumes are proportional to the providers'. For example, a follower will use only 4% of their account if the provider allocates that proportion for their trade.
7. NAGA Trader
NAGA Trader is originally named SwipeStox, a smartphone-only app that was developed similar to the social dating app. So, it was not surprising that SwipeStox was dubbed as the "Tinder of trading". The platform promised that copy trading could be easily done in a swipe, hence the original name.
Nowadays, it has been rebranded as NAGA Trader with a massive expansion in social trading service. But not everything from the previous brand is left behind. NAGA Trader still offers an algorithmic feature that displays matching trades based on your profile. In addition, you are allowed to interact with other traders. NAGA Trader offers its own crypto coin, the NAGA Coin (NGC), as your base currency. You can test out this platform by opening a demo account on its mobile apps or webtrader platform.
8. ForexCopy by InstaForex
FSA (St. Vincent & the Grenadines), IBC22945
Interest rate on funds
Islamic accounts available
InstaForex is an international broker that provides trading services to traders globally. Since it was founded in 2007, InstaForex has provided for clients from various countries as many as 7 million traders. Based in Kaliningrad, Russia, InstaForex always attempts to improve the quality of the company in order to captivate the hearts of their clients.
Their hard work can be proven, one of which is by achieving a variety of awards, including Best Forex Cryptocurrency Trading Platform 2018 by UK Forex Awards, Best ECN Broker Asia 2018 by IBM, Forex Broker of the Year for Eastern Europe 2018 according to le Fonti Awards, Development, and Success award at Financial Olympus 2016-2017, etc.
There are 4 types of account offered by InstaForex representing a universal trading tool that help to work on international financial markets, such as Insta.Standard, Insta.Eurica, Cent.Standard, dan Cent.Eurica. Trading account types differ by the methods of accounting spreads and commissions, which are picked by the trader opening an account.
Insta.Standard account is relevant for standard trading terms on the Forex market and allows a trade to be settled with classical spread and with no fees. Traders will be charged a fixed spread every time they make a transaction. Spreads that are provided ranging from 3-7 pips. The main advantage of this type of accounts is its universality, as a trader can change the trading leverage and work with a deposit size convenient for traders.
Different from Insta.Standard accounts, Insta.Eurica accounts do not require payment of any spread on opening a deal. Therefore, this type of InstaForex account is suitable for beginner trader with a minimum transaction of 0.01 lots.
There are also other types of accounts InstaForex, namely Cent.Standard and Cent.Eurica which can be used for beginner traders because they can use the minimum transaction volume, which is 0.0001 lots (the cost per lot is USD0.1 cent). Deposit currencies that can be used by traders are EUR and USD (for all types of accounts).
Trading in InstaForex is quite a given as traders can choose to trade with leverage between 1:1 to 1:1,000. With a minimum initial deposit requirement of only USD1 (for all types of accounts), InstaForex clients have the opportunity to get a 30% to 100% deposit bonus.
Not only that, but beginner traders are also exempt from confusion in determining forex trading strategies. Because Instaforex provides ForexCopy services that allow traders to copy orders from professional traders in just a few minutes.
And then, there are around 300 trading instruments offered by InstaForex for traders. In addition to currency pairs, there are also futures, shares, gold, silver, CFDs, Bitcoin, and others.
Every InstaForex client is free to choose a trading platform that can be tailored to their needs. There are four types of trading platforms available, including InstaBinary, WebIFX, MetaTrader4, and MetaTrader5. Each platform has advantages and disadvantages. InstaForex also provides video tutorials on how to register on each platform. It aims to make it easy for beginner traders who want to join InstaForex.
If a trader still confused after seeing the video tutorials, traders can contact customer service available 24 hours connected to various social media, including email, Skype, Whatsapp, Telegram, Viber, Twitter, and Phone Call. On the InstaForex website, there are around 30 languages provided to facilitate traders from various countries.
The trader can also help themselves with trading calculators provided on the InstaForex website. Traders can accumulate currency pairs, Leverage, volume, and currency used.
The payment system in InstaForex is also diverse. Traders can pay deposits via Visa, Mastercard, Skrill, Neteller, PayCo, as well as Wire Transfer. All in all, InstaForex is a well-rounded broker for many types of traders.
Recognized as the most well-known broker in Asia, InstaForex is a household name in the forex industry that is worth considering. The broker built its own proprietary copy trading platform named ForexCopy. Followers can select the best providers as the platform display the providers' trading portfolios, in which the providers can structure their own fee. However, they are entitled to commission fees only if the copied trades are profitable.
As for the losing trades, the followers would not need to pay anything to the providers. If the opened positions are not going to be profitable, followers can choose to manually cancel the orders. In addition, this platform offers the possibility to define each trader's ratio, lot size, and other settings when copying a trade.
See Also: Best Forex Brokers With Micro Lot
Is Social Trading Legal?
Social trading is legal. There is no prohibition of discussing and sharing ideas about trading. However, you should definitely not follow every piece of advice that you receive as some traders may have limited or even dubious knowledge. There are recommendations that you must only get from competent professionals. Also, telling peers what to do or claiming 100% profitability is best avoided. Other than that, social trading is legit.
Does Social Trading Work?
Yes, it does. Keep in mind, though, that the risks of losing money are always there; just like any other form of trading. Winning trades is not a guarantee, thus you must always make your own analysis beforehand and apply your knowledge accordingly.
Risks of Social Trading
Social trading does carry risks with it, regardless of the platform you use or your trading experience. This is normal, but in social trading, there are particular risks you need to get to know.
The primary risk is you can be influenced by bad traders which can affect your decision-making. Also, you will often stumble upon bold posts by enthusiastic traders who make big claims without any reliable evidence. This seems to be the norm in every financial market including forex, although other markets like crypto are considered to be riskier.
Bad influence or big claim aside, you need to remember the main function of social trading: to share ideas, gain knowledge, and apply it for your benefit. Blindly following other traders without verifying the information they share will only lead to disaster.
See Also: How To Choose The Best Traders To Copy
How to Benefit the Most from Social Trading
There are some ways you can implement in order to get the best out of social trading and to manage the risks. The first one is to follow reputable traders only. There is a reason why they have a good reputation. They usually have genuine expertise in trading and have a balanced view of the market. Learn from them as much as you can, but still, don't forget to make your own research.
The second way is to not follow any trading advice, particularly the overly enthusiastic "buy now or you will regret it later" kind of advice. It is best to ignore this advice and do your own research, even if the recommendation turns out to be true. When it is true, it is usually through the use of excessively risky methods that can damage your account in the long run. Most often, though, what they say is not true.
The third way is to learn how to copy trade. This may look difficult at first, but it is worth a try. There are some factors you have to consider before choosing a provider to copy, such as their experience, time horizon, winning percentage, risk/reward ratio, etc. The key is to copy trades that suit your trading style and need.
The Pros and Cons of Social Trading
Derived from the explanation above, here are some of the pros and cons of social trading:
- You can directly interact with experienced and successful traders.
- You have access to professional analysis from other traders.
- While trading, you have the opportunity to learn and hone your skills.
- You can easily be influenced by other traders, especially if you are a beginner.
- It is a social network, so anyone can share their opinion including non-experts.
Social trading can be very useful since you can share your ideas and gain knowledge from experts. That being said, we have to stress out once again the importance of making your own research and verifying the information you receive. This is especially true if you want to engage in copy trading. Following the wrong provider can cause massive loss to your account. That's why you should prioritize a platform that offers a vast selection of quality providers and their performance analytics to learn about their trading history.