HFM information and reviews
HFM
96%
FXCC information and reviews
FXCC
92%
FxPro information and reviews
FxPro
89%
FBS information and reviews
FBS
88%
XM information and reviews
XM
86%
NordFX information and reviews
NordFX
86%

What Is Social Trading? Differences Between Social And Copy Trading


With the emergence and powerful influence of social media, new investors and traders often look to those who boast about their win streaks and share charts that demonstrate accurate prediction after accurate prediction. Social trading has exploded due to the user base of top platforms like Twitter, Reddit, Facebook, Telegram, and more becoming interested in cryptocurrencies like Bitcoin, Ethereum, and other altcoins. At the same time, as this category grows, copy trading has also become popular which also involves being a follower within a community. 

These two types of trading strategies are extremely different, and this guide is designed to clear up any confusion between the two and explain the key differences of each. Both have their unique advantages and pitfalls, and we’ll help you understand which of them is more successful and why.

What Is Social Trading?

The way how social trading works can best be explained in a social media setting. Well known investors or traders with large followings on Twitter, for example, share their trading strategies publicly. Followers of these well known accounts carefully consider the trading information and signals shared and the price charts of the assets they’re interested in. Social traders utilize this information to make a decision based on the intel. These social traders then attempt to mirror the moves recommended by the influencer or chart they shared.

Social trading rarely involves just one influencer, and less experienced investors and traders often build a large social trading network of similar accounts. Because social trading features prominent names, it has become a popular choice among cryptocurrency enthusiasts.

And What Is Copy Trading?

Both social trading and copy trading involve following the trades of other people with more experience, however, they are extremely different in practice. Rather than relying on the integrity of a social network, copy trading includes access to a trader market profile filled with financial data pertaining to risk, success, margin allocation, and much more. 

Using fully transparent metrics related to profits and loss, copy trading offers an experience without worrying if the influencer you are following has your best interest in mind. And rather than being stuck still having to manage the positions yourself, when you copy trade, the software keeps track of the following and copies the trades of a more successful strategy manager.

Unfortunately, there’s no social trading platform today, so social trading happens across various social media platforms and whatever the trading platform of choice might be. Social traders scour social networks for traders with large followings or lots of interesting content they share. It is up to the social trader to essentially guess if the person they are choosing to follow has integrity and truly wants the best for their followers.

Followers then make an investment based on what the influencers they follow suggests. However, social trading stocks, crypto, commodities, and more carry risks, and social trading requires the follower to develop a risk management strategy all on their own, and must shoulder the responsibilities of managing positions and properly setting stop loss orders.

How Does Copy Trading Work?

With copy trading, there is the benefit of having a social trading platform-like experience with a fully transparent global leaderboard that ranks each strategy manager by profit. Deeper metrics on margin accolcation, risk, success, win to loss ratio, and much more are available in just a click, so followers get a much clearer idea of who they are following.

Copy trading isn’t without some responsibility, however. Followers must make sure those they follow continue to bring profits, and aren’t on a sudden losing streak. Copy trading lets traders diversify across many different strategies, as a risk management strategy.

There’s also an official Telegram channel for Covesting copy traders for an online investor to learn more about the method each strategy manager chooses to utilize, if the follower prefers to have a more personal connection with whomever they follow.

What Are The Benefits Of Social Trading?

With social trading, newcomers get to learn a lot about fundamental and technical analysis by following accounts that share a lot of information about their positions and trading strategies. 

Education can be expensive, so learning these skills for free from someone else with more experience can be a valuable way to grow your own skill set.

What Are The Benefits Of Copy Trading?

With copy trading, there’s a lot less worrying and managing positions on your own. Since copy trading utilizes innovative fintech software to connect followers with strategy managers, followers simply need to click who they want to follow and sit back and profit.

Followers will need to actively watch success and risk metrics to ensure the most success, but so long as a top strategy is chosen, becoming profitable takes significantly less effort and skill than social trading, which still puts most of the responsibility on the follower.

What Are The Disadvantages Of Social Trading?

With social trading, it takes great effort to properly curate a social network of influencers worth following, and even more challenging to know which ones are trustworthy. There have been several cases of analysts online photoshopping their PnLs to make it appear as if they are more successful than they are, to attract more followers.

They instead take advantage of their audience, peddling referral links, deleting incorrect calls, and lure these people into paid groups where they share so-called premium signals. What’s worse, is that even though these signals might cost a fortune to access, there’s no telling if they’ll make you a fortune back. And it still means that you are in charge of executing the plan and handling all risk management. 

What Are The Disadvantages Of Copy Trading?

Copy trading requires some patience and relinquishment of control. It requires that a follower have faith that the strategy manager who they are following will produce positive and profitable results. Having transparent success and risk metrics through the Covesting leaderboard system helps, but it still can be uncomfortable at first to try.

The Difference Between Social Trading And Copy Trading

The biggest difference between social trading and copy trading, is that with copy trading, another trader actually does the work for the follower. Using the Covesting copy reading module, followers put capital on the line to copy the trades of strategy managers ranked highly in the leaderboards. These strategy managers trade with that capital, plus their own, and any successful trades booked bring profits to both the strategy manager and the follower.

With social trading, the person still does all the work themselves, and instead rely on the signals of others who they hope they can trust. Because strategy managers actually have incentive they are encouraged to do well for their followers, and their efforts also impact their own bottom line. With social trading, influencers make money by pushing products, links, sponsored content, or could possibly be countertrading their audience or using them as part of a pump and dump scheme. 

Social Trading Vs. Copy Trading: Comparison Chart

Here is a visual breakdown of the various benefits and disadvantages both social trading and copy trading have to offer. Use the below chart to compare and contrast, and then decide for yourself which is right for you

Social Trading Benefits Copy Trading Benefits Social Trading Disadvantages Copy Trading Disadvantages
Gain education Hands-free Untrustworthy influencers Uncomfortable to let go
Highly social experience High probability of success High maintenance  
  Low risk Takes time to build network  
  Transparent metrics Shady practices  

Social Trading Vs. Copy Trading: Which To Choose?

No type of trading comes without risk, but with social trading, the risks are far too high to make it a worthwhile or profitable strategy. There are too many potential factors to consider, such as the influencer’s trustworthiness, their skills and knowledge, and more. Plus, it still requires execution on the follower’s part. 

With copy trading, a follower does much less of the footwork, putting the onus on the strategy manager to do all the heavy lifting and show the world what they’re made of. Not only is their own capital also on the line, but so is their reputation. 

These strategy managers can’t delete trades like they can posts on social media. Whatever trades they book and close, it shows via the data in Covesting. And because making a losing trade lowers their rank and not just their ROI, strategy managers aim to stay at the top of their games always. 

Strategy managers are humans also, and still can have a losing streak like anyone else. It isn’t a completely risk-free solution, but when following the right strategy, the results can be astounding, and easier than learning markets on your own.

Which Financial Markets Can You Trade?

Strategy managers and followers have access to the entire suite of trading instruments and tools offered by PrimeXBT. PrimeXBT is a margin trading platform that lets traders go long and short on forex, crypto, commodities, stock indices, metals and more. With so many options under one roof, this means that any financial market is available for copy traders to choose from.

Forex currencies include majors like USD, EUR, JPY, and others, but there’s also exotic pairs from emerging markets. Commodities and metals include gold, silver, oil, and gas. All major stock indices are also included, such as the Dow Jones, S&P 500, FTSE, DAX, ASX, and more. Cryptocurrencies range from Bitcoin to Ethereum and include altcoins like Litecoin, EOS, and Ripple. All are available as CFDs to Covesting strategy managers. The variety is endless.

#source


RELATED

Grasping the Concept Of Hedging in Forex Trading

Hedging is a financial trading technique that investors should be aware of and employ because of its benefits. It protects an individual’s funds from being exposed to a problematic situation...

What is Copy Trading and how does it work?

Are you interested in trading the financial markets but feel like you don’t have the time to learn new strategies? Maybe you already trade but can't find a way...

Four Ways to Use Your Red Envelope Money as a Trader

Lunar New Year is a major historical and cultural festival celebrated by millions of people around the world, particularly the Chinese, Vietnamese, and Korean communities...

Everything You Need to Know About Cryptocurrencies

The concept of money as we know it has evolved in recent years from purely physical money to a combination of the physical; digital representations of physical money...

The Essentials of Commodity Trading: A Beginner's Guide

Commodity trading, involving the buying and selling of raw materials and agricultural products, is a complex yet rewarding venture in the financial markets...

Mastering Market Liquidity: What Is It And How To Make Use Of It

The term "liquidity" is constantly being tossed around in the finance industry, but what exactly does it mean? Today, we will explore the concept of liquidity, its importance in trading and investing...

Reasons To Keep a Trading Journal

Why does a trader need a trading journal? It may seem like a simple question. Everyone knows: a trading journal is a tool that shows how many trades were placed...

Optimal & Suboptimal Hours in Forex Trading

In the grand tapestry of financial markets, the needle of time weaves intricate patterns. Among traders and investors, the perennial quest to discern the right moments to enter or exit the market resonates deeply...

Money Management

Although you may think the title of Money Management is pretty clear and easy to implement – how to manage your money and invest wisely, it is slightly more than that...

TOP8 Mistakes Forex Newbies Make

We all can be wrong from time to time. It's a common thing for the people who would like to gain experience in any area of life. There are no actions without mistakes...

Black Friday and How it Affects Markets

Black Friday can be best captured by images of customers sleeping in tents outside stores or running in hordes to enter their closest shopping mall, while...

Unlocking Potential: A Comprehensive Exploration into Day Trading

In the fluid and ever-evolving universe of finance, day trading has surfaced as a pivotal activity for individuals desiring to traverse the bustling waves of the stock market...

How to Trade Major Currency Pairs

The major currency pairs traded by forex traders around the world are the following: EUR/USD, GBP/USD, USD/JPY, USD/CHF, USD/CAD, AUD/USD, NZD/USD...

CFD trading: Pros vs Newbies

It seems like everyone is opening a trading account, installing mobile apps and desktop trading platforms, and adding online trading CFDs to their financial activities...

How to Trade Gold with AdroFx: The Ultimate Guide

Gold is one of the most traded commodities in the world along with oil, natural gas, and grain. But this precious metal is also one of the most interesting assets because it is considered to be a major safe-haven asset...

Why every trader needs a trading strategy

A trader without a trading strategy (TS) is like a driver with no map. Whatever your strategy is, it will help you deal with the chaos happening in the markets. This article...

Q2 2022 Earnings Season Explained

Earnings season is a few weeks when most public companies share their quarterly performance in their earnings reports. It takes place every three months...

What is speculative trading? A beginner's guide

The world of finance is a complex, nuanced and sometimes daunting place. There are many different types of traders with differing motivations...

Bollinger Bands: Unveiling Volatility and Price Reversals

Bollinger Bands consist of three key components: a middle line, an upper band, and a lower band. The middle line is usually a Simple Moving Average (SMA) or Exponential Moving Average (EMA)

Know Your Heroes: Successful Traders of Modern Era

We bet you've heard many times that a great journey starts with a small step. What if we say that success is just a journey, not a final destination. But where you have to...

Vantage information and reviews
Vantage
85%
FP Markets information and reviews
FP Markets
81%
IronFX information and reviews
IronFX
77%
T4Trade information and reviews
T4Trade
76%
Exness information and reviews
Exness
76%
Just2Trade information and reviews
Just2Trade
76%

© 2006-2025 Forex-Ratings.com

The usage of this website constitutes acceptance of the following legal information.
Any contracts of financial instruments offered to conclude bear high risks and may result in the full loss of the deposited funds. Prior to making transactions one should get acquainted with the risks to which they relate. All the information featured on the website (reviews, brokers' news, comments, analysis, quotes, forecasts or other information materials provided by Forex Ratings, as well as information provided by the partners), including graphical information about the forex companies, brokers and dealing desks, is intended solely for informational purposes, is not a means of advertising them, and doesn't imply direct instructions for investing. Forex Ratings shall not be liable for any loss, including unlimited loss of funds, which may arise directly or indirectly from the usage of this information. The editorial staff of the website does not bear any responsibility whatsoever for the content of the comments or reviews made by the site users about the forex companies. The entire responsibility for the contents rests with the commentators. Reprint of the materials is available only with the permission of the editorial staff.
We use cookies to improve your experience and to make your stay with us more comfortable. By using Forex-Ratings.com website you agree to the cookies policy.