Forex trading is more popular today than trading stocks due to the faster price movements. However, many investors draw back from investing in this market due to a lack of experience. With social trading, however, you can simply copy the trades of the foremost successful traders and invest your money without special knowledge.
In our test, eToro quickly turned out to be the most effective social trading platform. The reason for this was the excellent combination of trading offer, bonus, demo account and user-friendly service.
Find out more about social trading now or choose your platform directly from our top providers.
In This Guide
FCA, ASIC, CIMA, SIBL
up to 50% bonus
ASIC, CBI, BVI, FSCA, IIROC, FFAJ, JFSA, ADGM FRSA
up to 40% bonus
VFSC, FSC, IBFC
$10 000 demo
When choosing your social trading platform, concentrate to the following points in order to search out the best provider. Choosing the proper platform determines the long-term success of copy trading.
In order to see the principle of social trading, it first helps to orientate oneself to the approach of funds. Ultimately, a financial organization issues an investment portfolio during which investors can participate if it meets their needs.
A start line is that all investors can potentially benefit from one another with their individual strategies. Basically, two groups of investors come together. On the one hand, there are the experienced, sometimes professional, investors who are trying to find followers with their respective strategies. While the first group speaks of top traders or so-called signal providers, the passive investors are followers.
On the other hand, there are simple investors who are trying to find suitable patterns and strategies to orientate themselves on. Both sides find one another on platforms on the internet. Additionally, to the function of bringing the top traders and also the followers together. Many social trading providers also see themselves as communication platforms. This implies that investors can discuss with one another or with top traders. in the meantime, variety of different providers, each with a particular focus, have established themselves. We explain what’s important when choosing the correct provider and what else to think about with regard to social trading.
In order to participate in social trading, there are several options for easy investors to become a follower. this relies on the one hand on the provider but also on personal preferences. In the simplest version, the follower simply tracks the information and activities of the signaler or signalers he has chosen and tracks them in his own portfolio.
This strategy is the easiest and most non-binding. However, it also has its pitfalls. especially, it’s not always possible to choose the same breakdown of shares because the signal provider, since the same budget isn’t usually used for trading. In addition, there’s inevitably a time delay, in order that small price differences between the buy signal. Therefore, the reaction of the follower can make sure that the portfolios of signaler and follower don’t develop identically.
Although this easy sort of replicating certain behavior patterns is taken into account the original form of social trading, it hardly plays a role nowadays
In contrast, so-called automatic trading, also referred to as mirror trading or copy trading, is far more common. The follower’s trading strategy is fully linked to the activities of the highest trader. this will happen in several ways. Some providers, such as ZuluTrade or wikifolio, act in this context as pure platforms that bring the 2 groups of investors together, but don’t offer any portfolio management themselves.
The follower must therefore have a separate depot via which the transactions are carried out. An agreement between the custodian bank, social trading platform and investor then establishes a connection between the signal provider and also the follower’s custody account.
In theory, the investor no longer has to worry about anything. Additionally, there also are variety of providers in the field of social trading who also offer their customers custody accounts. I.e. manage the money or financial products themselves. One of these providers is ayondo.
The whole range of investments is also possible in social trading. Anyone getting into social trading should first be clear about their risk appetite and preferred trading strategy so as to settle on the proper provider supported this.
The most important principle should therefore always be to affect the respective risk and to regulate the trade budget to be used accordingly. Any products are quite suitable as an exciting addition. However, whether investors should entrust a large a part of their money to a highly speculative top trader is by no means recommended, even in sight of a dream return achieved in the past.
Social trading will establish or expand as an integral part of the financial investment. However, it’s not suitable as a mass model, because it is linked to certain conditions. This includes, in particular, a particular previous training of the investor in order to be ready to assess trading strategies aside from the sheer number of a return.
It is particularly interesting for investors who don’t feel addressed by the conventional offers. But who, because of their living situation, cannot find enough time resources for active trading around the clock.