Social Trading Revolution: Copy Trading and Investing platforms

Trading the forex and other financial markets has become available to the everyday, average person opening up numerous lucrative opportunities for those determined to seek trading success. As explained in our post on finding the best broker for you, online retail forex brokers have now made it possible for literally everyone and anyone to set up a trading account and access the markets to be able to trade and profit.

What has truly revolutionized the landscape however, rendering it even more simple and attainable to trade the markets, with no previous experience or expertise, is the rise in social trading, which came as a natural by-product of the rapid development of all types of social media, channels and communities online.

Due to the internet and the emergence of online retail forex brokers, small-scale, independent, online traders can gain market access and claim their own piece of the pie. In this sense, making money out of trading currencies, stocks and other assets has stopped being the sole prerogative of the big players, financial institutions and professional money managers. However, even with entry barriers lifted, competing with such players on the trading markets was still a daunting task for individual traders, since:

  • Know-how and relevant expertise is still a prerequisite for successfully trading the forex, stocks and cryptocurrencies markets
  • Changing market conditions and volatility require each trader to be up to date with the latest developments and trends and factor these in their trading decisions, which is not an easy task for sole, newbies of trading
  • A diversified investment portfolio, which requires specific knowledge for each different asset class, is still very essential for successful investment through trading.

With these in mind, the real revolution in the field of online trading, came with social trading, since by pooling and making available through sharing, the collective experience and expertise of many traders, the playing field of trading is being levelled. It is the social trading phenomenon that we shall be discussing in the present article, in an attempt to shed further light on what social trading actually is and what types of social trading are available; why it makes great sense for traders, especially novice ones, to use social trading and how to successfully go about it. Moreover, taking into account the provider’s perspective besides that of individual trader/customers, the article ends with an analysis of why forex brokers, or even forex affiliates looking to become Successful Affiliate Marketers, should rush to incorporate social trading in their offering and the distinct advantages to be had from such a move.

What is Social Trading?

Social Trading entails to the sharing, in real time, of trading actions, between traders belonging to the same network or community. Trading actions may be transaction moves, but also trading signals, ideas or news pertaining to trading. Belonging to a network allows traders to follow and even imitate each other’s actions.

As already explained, those who stand to benefit the most out of social trading are newbie traders, who can still enjoy the thrills of trading, without having to first learn all about technical and fundamental analysis, having to analyse financial performance or monitor economic indicators to be able to trade.

Instead, and thanks to social trading networks and platforms, they can simply take the back seat and let the more experienced traders deal with the analysis, while the novices get the information or even follow the ensuing trading decisions via the social trading network.

The different types of Social Trading

Social Trading is a broader term and there are different types of sharing between traders which qualify as social trading. Often people mistakenly use the term social trading interchangeably with the terms copy trading and mirror trading, assuming they all mean the same thing. However, social trading is an umbrella term and copy trading and mirror trading are narrower forms of social trading. The three main different manifestations of social trading therefore can be said to be:

  • Copy Trading

    In copy trading a trader’s portfolio is directly and automatically connected to the portfolio of the trader(s) that the particular trader chooses to follow and thus all trades made by the chosen traders are automatically copied in the portfolio of the trader. Hence, instead of merely gathering information, digesting it and making the investment or trade decisions on your own, by using the copy trading functions of a social trading network you can have trades being copied automatically. There are many dedicated copy trading platforms around, such as eToro, ZuluTrade and Ayondo, as well as many forex brokers who have added the copy trading feature in their existing offering. The traders to be copied are ranked according to various criteria including profitability, maximum drawdown, number of followers, risk etc. Using this information, less experienced traders can decide who they trust and assign a percentage of their own capital to be invested, through copy trading, in opening the same positions and achieving the same outcomes.
  • Mirror Trading

    Through similar to copy trading, mirror trading, which is primarily used in forex trading, is not about copying specific traders, but copying or mirroring automatically trading strategies. A ‘mirror trader’ therefore, selects a trading strategy based on what currencies they wish to trade, how much money they want to make and how much they can afford to lose. When the chosen strategy’s developer opens a trading position, the same position is automatically opened (or mirrored) in the investor’s account. Due to its fully automated nature, mirror trading often requires larger capital levels to accommodate the great volume of trades generate, so it is usually preferred by more experienced traders.
  • Signals and Tips

    Besides the automated ways of copy and mirror trading, social trading includes less automated ways to trade, such as the sharing and usage of signals and tips. Trading tips may be provided by professional or experienced traders for free, through a social trading network, a blog, a website, or their social media accounts or via dedicated subscription services, developed by brokers or others. Forex signals, may also be obtained either for free or at a subscription fee, and they are either the result of human analysis or specially developed algorithms.

Does Social Trading Work and what does it take for it to do so?

The booming of social trading networks, the incorporation of social trading features into the trading platforms of most brokers and the hordes of traders who follow others or are being followed, are all testament that social trading does work and that it can lead, especially novice traders, to successfully ride the waves and start making trading profits even from day one. The advanced features contained in most social trading networks today, make it perfectly possible to pick profitable and consistent traders to follow and profit from their own trading skills, expertise and market know-how.

This being said, inherent risks are present in social trading as they are in trading in general. To mitigate such risks and to hedge against potential losses that may be incurred through social trading, traders should behave in the same manner they do when trading on their own. Hence, for social trading to work to your benefit, before starting your social trading endeavours, ensure that you:

  • Set up a demo social trading account to allow you to master the skills required to be able to effectively choose the most suitable and profitable traders to follow.
  • Have a proper risk management strategy in place and make sure you stick to it.
  • Especially when you are copy trading or mirror trading, make sure you closely monitor your trades and their smooth execution by the trading platform you have chosen.
  • Try to remain abreast of prevailing market conditions, outlook and developments to be able to have your own opinion and not blindly follow others.
  • Only deposit in your social trading account funds that you can afford to lose and do not keep all your eggs in one basket.

The advantages of Social Trading for traders

Social trading offers distinct advantages to traders, whether they are aspiring, existing or even seasoned in the field of online financial trading. In fact, social trading platforms can immensely help solitary traders to effectively compete with the investment Goliaths, which are big institutions and institutional investors. Below is an indicative overview of the main advantages and benefits of social trading, due to which the playing field of online trading is truly levelled:

  • Ease of Accessibility and Use

    Existing traders and newbies are spoilt for choice when it comes to social trading networks and platforms to choose from, which are freely accessible. This allows aspiring social traders to choose the social trading venue that best suits them. Moreover, thanks to the innovative technologies used by most social trading platforms and the brokers offering social trading, the entire process of copy trading is easy and fast, via intuitive web interfaces and user-friendly dashboards.

  • A great reduction in the learning curve

    The required learning curve of all newbie traders is greatly reduced though social trading, since they are allowed to watch and learn from those who know best and have successfully done it all in the past. Since they can also not just watch, but at the same time replicate successful trades and keep the profits, social trading is the best version of “on-the-job” training one could ever hope for.

  • Portfolio diversification

    Social trading networks allow traders to have access to the trading decisions of traders in multiple markets and asset classes, such as forex, equities, stocks, futures etc. This means that individual traders are enabled to spread out their trades, thus also spreading out the associated risks and increasing their chances for success. The diversification of one’s trading portfolio and the allocation of your investment funds to multiple markets and asset classes, without having to master the secrets of each, is one of the strongest pros of social trading.

  • Fast data access

    One of the strongest assets of social trading platforms are their numerous social network features, which include, but are not limited to, newsfeeds and messaging, though which all traders can share, exchange and learn up-to-the-minute trading news and insights on all asset classes, thus rendering the taking of informed trading decisions a walk in the park.

  • Elimination of emotional trading and personal biases

    The access to the trading ideas, strategies, experience, insights and perspectives of seasoned traders from all over the globe that one is exposed to through social trading platforms is instrumental both in eliminating or curbing personal biases that might blur one’s trading decisions, while at the same time help curb excessive emotional load when trading. Investment decisions should be taken with the head and not the heart, but especially for novice traders, who are unaccustomed to the pressures and stresses of real, live trading, this is often difficult, as strong emotions may get them to be carried away and take unnecessary risks. Through the copy or automated mirror trading that is offered by social trading platforms however it is possible for novices to take emotion out of their trading equation.

  • Increased confidence and fast access to profits

    Due to the collective nature of social trading and the wealth of experience and tips they are exposed to, novice traders can quickly learn and build their own confidence when it comes to their trading skills. What is more, while they are gaining this added confidence to be able to take their trading decisions on their own, they can start making money immediately through copying the trades of others, provided they have chosen who to follow wisely.

  • A win-win for newbies and pros

    Besides getting a chance to learn, while also winning that is made possible for novice traders through social trading, the more experienced traders stand to gain as well. Social trading provides them with the opportunity to earn extra revenue when they join and agree to provide their trades up to copying for their followers. This is a great way for seasoned traders to share their skills and wisdom and get rewarded for trading successfully, based on the number of followers they have and the trades they place.

  • Added accountability through transparency

    Social trading platforms allow one full access to traders’ portfolios and offer knowledge not only on what trading decisions they are taking, but also why they are taking them. Moreover, you can track and study each trader’s track record as well as their risk tolerance. This complete transparency adds accountability to the process, as there are no shady corners and all traders are accountable and responsible for each trading decision they make. What is more, full transparency allows you to stop following or copying a trader the minute you observe something you don’t like in their trading behaviour.

How to get started with social trading

Having overviewed what social trading is and what you stand to gain by resorting to it, let us now explore how you can start your social trading endeavour:

  • The first step would be to open a social trading account, either on one of the dedicated social trading networks, or with a broker that offers social trading on their platform. They are hordes of such around and some research and effort would be required in order to analyse their offering and features to choose the one that is best suited to you. This is a crucial choice and decision to be made and we shall be discussing it further below.
  • Once your account is set up, the next step would be to identify the consistent and profitable traders that you will choose to be following. All social trading networks and platforms put at your disposal numerous tools, which you can use to filter their available traders and be able to compare their profitability, win rates, risk tolerance, drawdown, return on investment and other traits and indicators. Some of the most innovative and advanced social trading platforms even allow you to run simulations to be able to know your possible profit by following your chosen traders over a set period of time.
  • Once you make your selection of traders, the next decision is to determine how much of your funds you will allocate to each of the chosen traders and start copying or mimicking their trades.
  • While if you have chosen the right platform and the right traders, chances are you will then just be able to sit back and watch profits roll your way, the prudent and wise approach would be to at least periodically return to your social trading account to monitor your progress. Remember that you may at all times, either choose to add new traders to follow, or stop following and copying any of those already chosen and replace them with others if you deem it necessary. As already discussed, one of the prime benefits of social trading is that it allows for diversification. Being able to copy trades from different traders, who use different strategies and approaches is a great way to mitigate risks and be able to offset any incurring losses in case one or more of your chosen traders turns out to perform poorly.

What you should always remember is that your social trading success depends largely on choosing the right traders to follow. This being said the right traders for you are not necessarily those featuring the highest on boards. You should spend some time and effort analysing prospective traders to follow and make sure you have a good idea about their skills, performance and preferences. This will help you match them to your own needs and wants. Always factor in how much capital you are willing to put down, how much risk you are willing to be exposed to, and what sort of returns you are after.

If for example you are determined to trade aggressively aiming at higher profits at the fastest possible time, then be prepared that this also means higher risks and bigger drawdown levels. On the other hand, if your approach is more conservative, then you should choose less risky traders, who may be yielding lower returns in comparison to the more aggressive ones, but can also ensure very low drawdown levels too. At the end of the day, the choice is yours and depends and what exactly you are set out to achieve.

Finding the best Social Trading network or broker for you

How to Find the best Social Trading network or copytrading broker

As pointed out already, deciding with which social trading network or broker you will open your trading account is of vital importance towards your overall chances for social trading success. However, deciding which is the best for you can be tricky, so below are various aspects and tips you should look out for.

For a more detailed account, you may also consult our previous posts, as many considerations are similar. The main point is that there is no such thing as the best social trading platform or social trading offering broker, but the best one for you, i.e. the social trading venue that best matches, suits and serves your own needs, circumstances and aspirations. However, to be able to compare between social trading platforms and social trading offering brokers, carefully consider the following:

Trading Costs are a key comparison factor and often differ greatly from one social trading provider to the other, therefore you should make sure when comparing to have a clear picture about the spreads and fees you will be charged, the minimum requirements in place in terms of deposits and trade size, as well as the available methods and any associated charges with respect to depositing funds in your social trading account and withdrawing them when you decide to do so.

Another important factor to compare is the actual platform and its functions and characteristics. When comparing social trading platforms, pay particular attention to ease of use and a user-friendly interface. Also award extra points to configurability as being able to customize your display in a manner that is clear to you and matches your logic, will enhance your user experience and make it smoother. Platform performance, especially when it comes to the execution speed of the various trades and transactions is another important element that you need to take into account when comparing between social trading providers.

And since social trading is still trading and it is your money that is at stake, platform and broker security should also be a requirement before making your choice and opening a social trading account. Credibility, security and reliability are essential merits of your social trading provider as their presence will give you added confidence when starting out your social trading endeavour.

However, nowadays most social trading networks and social trading offering brokers are indeed trustworthy, so you will need to seek further to be able to differentiate their offering. Other features to compare between could be the available trading hours and any possible downtime, the available markets and asset types and categories, as well as any added functionalities which enhance the overall experience. These may be in the form of tools, widgets, news feeds, advanced analytics and others that help you maximize your prospects for social trading success.

Other features that might come in handy on your paths towards social trading success, may be risk management tools that will allow you to stop losses from building up as well as mobile apps that will allow you to access your social trading account on the go from any smart device, without having to compromise any functionality and features.

However, since what is distinct about social trading, differentiating it from other forms of trading, is the ability to copy trades, then high quality copy trading is the most essential component you should be looking out for. Moreover, you should award extra preference to social trading providers boasting a big volume of fellow traders onboard, as this means the size of the pool of potential traders to be copied is greater and so are the chances to find traders that suit you to follow.

Your outlook should also be more favourable on social trading providers who provide you with the maximum amount of data and information on each trader, including a complete and detailed history of their past performance, how successful and profitable they are and what strategies they are following, as having as much insight will help you make the wisest and most suitable choices regarding which traders to follow and copy.

To maximise your chances for success you need to ensure maximum variety and flexibility so you are better off avoiding social trading platforms, networks and providers that impose any kind of limitations with respect to the number of traders you can follow or copy, or the types of trades you can track or execute.

Once you choose the right social trading provider and carefully pick the best and most reliable and profitable traders to follow, while also ensuring to keep your assumed risk under control, success through the use of social trading almost becomes almost inevitable. In a nutshell then, if you are a trader chances are that social trading either as your main trading activity or complimenting the trading you do on your own, can only have beneficial effects. If you are new you can watch and learn and earn by copying and if you are already an expert you can earn more by letting others learn from you and copy you.

The distinct advantages of offering Social Trading as a broker

Social Trading has been around as an option for traders for the past decade or so and its appeal to traders across the globe shows no signs of fatigue, but rather a continuous upsurge, aided by the overall penetration and popularity of social networks in general. Social trading is a much searched for term on search engines, and the growing demand for such services has led several brokers to jump on the bandwagon. Besides brokerages that focus exclusively on social trading services, such as eToro and ZuluTrade, more and more forex brokerages take the leap forward and include social trading in their offering, since adopting copy trading technologies is a great way to both expand their reach to new clients and offer an increased element of transparency in their operations. There are a lot of good reasons why any forex brokerage should start offering social trading technologies to their clients, but if you are a broker and are not quite convinced yet to make the move, here’s a few of the very important advantages to be had:

  • Gaining a competitive edge

    By offering social trading, which is already hugely popular among traders you will be able to open up your brokerage to new markets and be able to attract new customers. With the online retail forex landscape being fiercely competitive and difficult to achieve a differentiation and stand out, introducing a copy trading system will help you gain a competitive edge over all other brokerages that still won’t offer this option to traders. Act fast to get there first!

  • Achieving the opening of more new accounts

    Since actually trading the forex market requires a broad knowledge base many novice traders are hesitant to set up a paying account or even a demo one, for fear of losses resulting from not adequately understanding how the game is played. Social trading comes to remedy this, since the confidence of being able to copy or replicate the trades of successful, seasoned traders and be able to learn for them, allows novice traders to overcome their hesitations and proceed to open both demo and live accounts and start trading.

  • Ensuring improved account conversion rates

    Building on the point raised above, social trading can also bring huge improvement in your account conversion rates. Most brokerages have problems converting demo accounts into actual accounts, while many have to deal with increased closure rates of live accounts within the first month of opening, since many novice traders pack up and leave as soon as their initial deposit amount is lost, for fear of further losses. Through social trading, which provides a very easy and simple method to be able to copy or imitate those who know best, new traders can avoid initial losses and immediately start profiting without needing to know which pairs they should choose or learning how the user interface of the trading platform even works. They just need to copy the top performers and they are set to go.

  • Boosting the trading activities of existing customers

    Offering copy trading will not only help you attract new customers, but also put an appealing and useful tool at the disposal of your existing customers too, allowing to include it to their existing trading strategies. Offering a variety of subscription modes will encourage existing traders to get into social trading as well, either as leaders or as followers, leading to the yielding of better results and to higher trading volumes and activity. This also increases engagement and helps with the long-term retainment.

Attracting Traders via Social Trading

Having briefly overviewed the numerous advantages to be had for brokerages that opt to add social trading software to their offering, here’s a couple of pointers on how you can more effectively attract new customers to your brokerage by playing the social trading card well. Embed and align social trading to your existing forex education offering Since offering education on forex trading is such an integral part of any good forex brokerage offering, embedding and aligning the social trading aspect to this can lead to tremendous results and prove every effective in strengthening your lead generation funnel. For a more detailed account on strategies regarding Forex Digital Marketing strategies, check out our dedicated article on Lead Generation strategies for Forex businesses. Purchasing decisions are often encouraged and affected by social proof and social trading can give you this much needed push. Make sure all new visitors can have access to statistics and information about the performance of your existing clients and accentuate the fact that by copy trading and trying out their trading strategies, success is not only possible, but almost guaranteed. This approach can do wonders in terms of boosting trading volumes, because prospective clients will be making their decisions not based on mere comments or reviews, but based on hard facts and tangible evidence. Make social trading a prominent part of your forex website In the case of online retail forex brokerages, their main sales funnel entry is their website. When you decide to add social trading to your offering, make sure that this is prominently showcased on your broker website, not only by merely displaying screenshots of trading statistics achieved by top performing traders, but also by including subscribe buttons and having simple registration processes readily available. Make sure your website is optimized to cater for effective social trading and also that you encourage interaction with users to ensure the best possible results in terms of conversions.

How we can help brokerages reap the benefits of social trading As already discussed in our post showcasing the multiple lucrative opportunities and benefits for forex brokerages that choose to integrate an Investment Platform, at start-business-online we can help interested forex brokers by putting at their disposal specially designed solutions that enable them to offer their clients an innovative investment platform, via which they can offer not only social trading, but also PAMM and MAM accounts. The two latter are most suitable for professional traders, while the social trading component is ideal for increasing your client base, since it is aimed mostly at novice traders who feel more comfortable to configure copy trading, rather than delve into the deep and the unknown through money management setups. Such an innovative solution could potentially do wonders in terms of boosting a brokerage’s revenue potential and being tailor-made, it allows each brokerage to choose which features to incorporate. Through this investment platform, each broker can offer copy trading as an additional service to their trader clients.

Social and copy trading will become a highly attractive proposition through this solution, especially for novice traders, who have little or no experience of markets and trading. Moreover, the social trading turnkey solution is packed with features and tools that aid both the brokers to incorporate it and the clients to effectively use it. Such features include inter alia: Full integration with the MT4 and MT5 trading platforms in an effortless manner, both for frontend and backend components

A reliable history importer ensuring access to trading statistics and data of those featuring on the leaderboard, supported by dedicated widgets Clients are given full control over their accounts through web interfaces Useful risk management tools for clients to control drawdown and effectively manage risk limits Automatic fee payments and several fee types, including flexible performance fees, which allow the effective management of rewards for successful providers

To sum up, sensible forex brokers should jump on the opportunity to expand their brokerage offering by including social trading software to their services, as this will have the twofold benefit of allowing them to attract new customers, as well as boosting the trading activity of their existing client base.

Social trading platforms like eToro and ZuluTrade have experienced huge popularity because traders are drawn in huge numbers by the multiple benefits to be had. However, such trading platforms face certain limitations especially with regards to costs, processes and transparency. On the other hand, through innovative, technologically advanced, custom made, turnkey solutions, brokers can offer their own version of a social trading platform to their customers offering fast transactions and robust recording tools, thus creating increased levels of trust and transparency.

Such increased transparency coupled with an attractive social trading platform could prove an invaluable tool as part of a broker’s overall promotional strategy, leading to an expansion of its client base and allowing the increase of its revenue potential. With the addition of social trading, especially if transparency can be ensured, conversion rates can be greatly improved and this is beneficial not only for brokers themselves, but for their affiliates as well, rendering the provision of social trading an effective means of digital marketing and a powerful conversion generating weapon leading towards brokerage growth.

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Posted by
George Milios

George Milios

Lead Generation & Business Growth Specialist

Helping Companies Scale their Organic Traffic & Conversions over the long-term by implementing strategies that work. In addition, George is an avid cryptocurrency researcher, advisor, investor, and trader.

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