all the details about social trading

Social trading is a process by which investors come together on an online trading platform and exchange essential information regarding trading opportunities. These investors usually log into a website, forum, or chat room and discuss FOREX, the commodities market, and other financial instruments. These exchanges allow certain trader to make decisions by reinforcing their ideas or by giving them the opportunity to generate new trading ideas.

Social trading has introduced a new way of analysing financial information and implementing trading strategies by copying those of other traders. In other words, social trading can be seen as a kind of social network for trading and investing in general. But beware there are pitfalls in social trading that are not recognisable when you start. Here are our tips.

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How to choose the best social trading site?

 

Before deciding on the best social trading site, it is important to remember what one of the most popular investment strategies today is. The social trading is a strategy that provides opportunities for traders, generally the most novice to automatically copy the positions taken by other traders referents because they are experienced and do well with regular profits into real money. From the online platform, the trader does what is called copy trading on the stock market. This investment strategy has several major advantages:

  • Opening of positions, with high presumed potential, without carrying out fundamental or technical analysis, while taking advantage of the leverage effect;

  • Sharing around the investment strategies used by the referent trader to learn the mechanisms of the financial markets (trend, volatility, support, resistance, etc.);

  • Automation of order placement;

  • Use in all financial markets: social trading of forex, stocks, crypto currencies and other assets available on the stock exchange.
     

Several criteria must be taken into consideration in order to make the most reasonable choice, and to guarantee as much as possible not to come across a social trading scam, an increasingly widespread scourge.

Choosing a regulated broker: It may seem obvious. Yet brokers keep finding new marketing ways to attract and retain their traders. Regulatory bodies (such as the AMF in France, or the FCA in Great Britain) monitor and validate the best practices of brokers. It is essential to open a social trading account on one of the regulated platforms.

Use efficient platforms: It is essential to feel comfortable using your trading interface. Beyond the aesthetic aspects (which are very important), in our opinion, it is preferable to choose an intuitive platform, which offers comprehensive tools (indicators, leverage, etc.), with a good reactivity / stability ratio.

Estimate brokerage fees: Make sure that fees (spreads and commissions) do not impact too heavily on real money profits. Our social trading user review promotes free social trading, rather than paid access which has no additional benefits.

Evaluate the seriousness of the broker: The recognised expertise of a broker is an important criterion for trading online with the best possible conditions. Opinions from traders and analysts are excellent sources.

Opt for Quality Customer Service: When you have questions or technical issues, good customer service, with multiple languages ​​available, makes it easy to get a good social trading opinion.

social trading on etoro with our trading platform for beginners

Social trading on eToro

 

Social trading on eToro is the backbone of the CFD forex broker. eToro was the first to position itself in this segment, and remains the market leader today. Here are a few points of the social trading experience with eToro:

  • Automated and simplified social trading via the CopyTrader and CopyPortfolio tools (copy a single referral investor / copy a complete portfolio of assets);

  • EToro's Popular Investors program which rewards the best referring traders with their consistent results. The more they are copied, the more they receive a significant remuneration;

  • The eToro social news feed is, in a way, the Facebook of social trading. Traders can share information on investment strategies, trade on topics such as Bitcoin;

  • A strong presence on all the biggest social networks.

Opportunity


All opinions agree on this point. Social trading is a great way to approach real money investing, without having too much theoretical information on how the stock market works, while optimising its risk management. The platforms offer their users intuitive and easily configurable interfaces for optimal management: ranking of referring traders, rating, automatic trading, search by asset, etc. It is an interesting strategy to develop its initial capital, however small, for investors who do not master enough their basics, while improving, through social sharing, their skills.


Disadvantages


This method is not a quick fix. It is important to remain vigilant when entrusting the investment of your money to the advice of a third party. There is no guarantee that a successful trader today will be successful the next day. The community trading offer is also a good way to attract clients. It is essential to ensure that the deployed platform is serious, with a drastic selection of traders put forward. Investing online is very risky. Social trading does not remove them.

Risk profile

 

Depending on the family of assets chosen and the level of risk tolerated by the trader, the investor's profile to follow is not identical. Having an eye on the relevant stock exchange makes it possible to assess the level of risk represented by a position to be copied. Some platforms also indicate how dangerous an order is, compared to trading signals. Doing social trading does not mean forgetting your money management. Keeping a cool head in choosing the right trader is of great importance.

 

Past performance

 

The regularity of the trader to copy is an essential criterion. Do not hesitate to analyse past performance over the previous month, quarter or even semester. A social trader should favour statistics with regular gains, even if they are less important in the short term. A trader with good results over long periods is not a high roller, but an investor who analyses the markets and weighs each of his decisions.

 

Popularity?

 

Certainly, social trading relies on the dynamics of social networks. However, it seems obvious to us that popularity alone is not a sufficient criterion to determine whether an investor is reliable or not. The social trading scam is spreading more and more. Teams favour dubious profiles and collect endowments from brokers, without consideration for the results of traders who copy. Popularity can mean that the user is just proactive on the community network.

social portfolio etoro trader

The diversity of assets in social trading

Social Forex Trading

 

Forex is the favourite market for day traders, and is well suited to automatic social trading. Beginner investors can quickly take advantage of the high volatility and the large liquidity of the currency market by following specialist referrals. Money comes in quickly through a large number of transactions per day.

 

Social trading of binary options

 

The binary options or futures are often reserved for professionals because they represent too big a risk of loss. With social trading, some brokers offer this potentially very profitable opportunity. Subject matter experts share their information and tips.

 

Social stock trading

 

We will talk more here about stocks in the form of CFDs. That is to say, it is a question of trading underlying products, which do not make the owner of real shares. But social stock trading allows you to speculate on the rise or fall of the price of a CFD on a stock.

 

Social commodity trading

 

In most of the brokers mentioned, it is also a question here of social trading on the opening of CFD positions on commodities. By scalping, day trading or swing trading, it is possible to make money on these highly traded assets on the best financial markets.

 

Cryptocurrency trading

 

Crypto currencies - Bitcoin in the lead - represent the new opportunity that makes you dream. We are not talking here of a passage through a crypto purchase or exchange platform. Social cryptocurrency trading allows you to speculate on trend movements to take advantage of micro price variations.

67% of retail investor accounts lose money when trading CFDs with this provider. You have to ask yourself if you can afford to take the high risk of losing your money.