With the rise and power of social media, new investors and traders frequently look to those who brag about their winning streaks and share charts that show accurate predictions after one another. Social trading has exploded as users of popular platforms such as Facebook, Twitter, Telegram, and others have become interested in cryptocurrencies such as Bitcoin, Ethereum, and other altcoins. At the same time, as this category grows, copy trading, which also includes being a follower within a community, has become popular.
A Quick Word About Social Trading:
First of all let’s talk about what is social trade and how it works. Social trade is a feature offered by certain investment platforms that integrates social media and investing. It typically enables users to:
- Consider following other traders
- Monitor the statistics of other traders
- Receive notifications about other users’ trades
- Make contact with other traders.
Different platforms take different approaches, but they all emphasize collaboration and community. Many provide chartrooms or public “walls” where users can leave messages and discuss strategy. While popular applications like eToro enable social trading for stocks and cryptocurrency, it is most popular among Forex traders. If you’re new to investing, social trading is a way of learning from other investors.
The difference between social and copy trading
1. Control Level:
The level of control in each strategy is one of the primary distinctions in both social and copy trading. When you participate in social trading, you will have a greater degree of control over the types of trades that are carried out by the traders you select because you will be able to interact directly with them via chat rooms or messaging platforms. However, your connections will be much more limited when copy trading. Instead, you set up a trade replication system and let it copy the trades of your favorite traders in full and automatically.
2. Risk Management:
Another significant distinction between social and copy trading is how risk is managed. While social trading allows you to control the risk level you take on with every trade, copy trading often provides a more automated approach to risk management.
Some examples include being able to choose which types of trades are copied (e.g., copying all or only certain types of trades) and having the option to stop the replication system when certain conditions are met (e.g., when an account falls below a certain minimum).
3. Strategy Choice:
Social trading and copy trading also have different strategies. Most platforms support both types of trading, but some only support one, so it’s important to do a lot of research before deciding which type of trading is best for you.
The Advantages Of Social And Copy Trading:
In addition to being simple to use, social and copytrading provide a number of advantages to investors. They can, for example, assist you in improving your trading skills by giving you access to the knowledge and expertise of experienced traders. They can also help you focus on other important parts of your investment strategy by reducing the time you spend managing your trades.
Also, both types of trading give you more control over risks than many other common ways to invest, so you can protect your investments from possible losses.
Which Should You Pick? Copy Trading Or Social Trading?
Based on the advantages of computer-based algorithms and the vast amount of time required to trade forex manually, the answer is simple: copy trading. The time, skills, and ability to track, and execute trades are beyond the abilities of the average trader due to the nature of the forex market. The amount of time required to trade forex efficiently and profitably is so large that most traders simply do not have this luxury. This is why traders should consider copy trading as their best option.
What matters most is that you use the tools that are available on the market. Finding a reliable service provider for your copy trading is even more important. eToro is a platform capable of providing you with those capabilities, as well as the best traders, technology, and customer service. Because of this, customers keep coming back to eToro to take advantage of their improved automated trading features, which have helped their users keep doing well.
Copy trading and social trading are not the same. It is critical to distinguish between the two. It’s also vital to evaluate your goals in order to make the decision easier. Make sure you choose something that you are at ease with. You should always be aware of the reasons for your decisions. Consider what you really want and what matches you best. Either way, you can’t go wrong.