CFD trading is based on speculation and involves a significant risk of loss, so it is not suitable for all investors (74%-89% of retail investor accounts lose money trading CFDs).
The below tables compare the characteristics of social trading networks, as well as mirror trading or copy trading platforms and PAMM accounts. These forex trading networks (ZuluTrade, MQL5, HF Markets, Duplitrade, FxOpen) are also discussed in the social trading section. They often use different names to describe the people or trading strategies that you can copy (ex: signal providers, trade leaders, gurus or strategy providers). In the following tables, we simply use the word "Traders" to identify them.
The information displayed on this page is presented on an indicative basis. It relies on the data published by brokers on their respective websites and there may be a lag between the updating of their data and this broker comparison page.
|Home office||Choice of brokers||Minimum deposit||Trading instruments||Cost per trade||EUR/USD spread||Demo account|
|2005||Nevis||FxOpen||1 $/£/€||Forex, indices, commodities, cryptocurrencies||Spread||~ 1.1 pips||Open an account|
|2017||Cyprus||11 brokers||2000 $/£/€||Forex, indices, commodities, cryptocurrencies||Spread||~ 1.16 pips||Open an account|
|2010||Cyprus||HF Markets||300 $/£/€||Forex and gold||Spread||~ 1.2 pips||Open an account|
|2013||Cyprus||Brokers with MetaTrader 4 and 5||5 $/£/€||Forex, indices, commodities, shares||Spread||~ 1.7 pips||Open an account|
|2007||Greece||Proprietary broker (AAAFX) + 14 others||300 $/£/€||Forex, CFDs, cryptocurrencies||Spread + 0.8 to 1.5 pips (0 pips for AAAFX)||~ 1.2 pips||Open an account|
|Number of strategies||Automatic copying||Ability to initiate trades manually||Allocation of funds Risk management||Max. number of traders you can copy at the same time||See traders' account balances|
|5,000+||with an internet connection||1|
|Conditions to become a trader||All traders use a real account||How are traders paid?||Payments linked to performance||Trading history||Export history to Excel|
|Open a real account||Variable according to the trader||If the trader accepts|
|Traders selected by DupliTrade, min. opening balance $2,000, 20% max. drawdown||$5 per lot||only for profitable trades||Complete|
|Open a real account||Up to 35%||only for positive months|
|1 month trading history||Fixed monthly commission||Complete|
|Max. DD of 30%, 12-week trading history, profit per trade greater than 3 pips||0.5 pips for each trade or 20% of profits||only for positive months||Complete|
|Interact with traders||Rate traders||Mobile app||Integration with Facebook||Integration with Twitter||Forum||Our review||Open an account|
Social trading is an area of trading that proponents say makes trading accessible to everyone by making information more accessible to those with less experience.
Social trading works using the same basic principle as social media: Subscribers to social trading services or platforms can follow other traders and view their trading activity and data. They can then use this information to guide their own trades.
Some forms of social trading, such as copy trading and mirror trading, allow users to automatically copy others' trades.
Regulation is as strict as it is for the rest of the finance and investment industry.
Let's explore the history of social trading, its various forms, as well as its inherent advantages and disadvantages.
Social trading is the logical evolution of traders talking to each other about their day's work.
Imagine the scene in the early 1990s when a group of traders meet in a pub after the markets have closed: one of them tells the others about a position he has opened that seems certain to turn a profit. The other traders like the sound of this investment and copy it for themselves the next day.
If you follow this scenario through the technological advances of the last few decades, you can easily imagine this conversation being repeated in emails, and then in chat rooms and via internet forums, with more and more people able to hear the conversation each time.
Soon enough, the idea of charging people for access to the conversation developed. And with the rapid rise of social media sites such as Facebook in the 2010s, it was only a matter of time before trading got its own version.
So now, the secrets of the trading room are out there for everyone to see and use to his or her own benefit.
Different platforms allow different forms of social trading. Here are the most popular ones:
The term "copy trading" is sometimes used interchangeably with social trading. This can be misleading, as while copy trading is a form of social trading, social trading is not necessarily copy trading.
Copy trading platforms, such as ZuluTrade, allow investors not only to follow traders, but also to automatically copy their trades.
Traders are ranked according to various criteria such as profitability, their maximum drawdown (the most money they have lost after a series of bad trades), number of followers, risk level applied, etc.
Thanks to this information, less experienced traders can decide who they trust and allocate a percentage of their money in order to trade the same positions. For example, for every £200 that trader X invests in stock Y, you can ask the platform to invest £20 of your money.
Your position closes at the same time as the trader's and you make the same relative profit or loss as trader X.
Mirror trading is used in forex trading. Although it looks identical to copy trading, there are key differences, the main one being that it is a strategy that is copied, not a trader.
An investor (or 'mirror trader') chooses a trading strategy based on the currencies he or she wants to trade, how much he or she wants to make and how much he or she can afford to lose.
When a position is opened by the developer of the chosen strategy, the same position is automatically opened (or mirrored) in the investor's account.
Mirror trading is generally used by more experienced forex traders, as its fully automated nature can result in a high volume of activity and therefore requires more capital than copy trading.
Social trading focuses more on gaining ideas and knowledge from different websites and services to develop new strategies, share tips and invest in tools. Copy trading focuses more on duplicating trades and only profiting from the results.
Beginning traders may want to start with social trading to understand market behaviour and trends before engaging in copy trading.
One of the main benefits of social trading is that it cultivates collective knowledge. Less experienced traders who subscribe to social trading platforms don't just receive the opinions or the strategy of a single more experienced trader; they receive a much wider range of information from multiple traders.
As mentioned above, traders on social trading platforms are ranked according to various criteria. This gives other users a degree of security, as they can assess a trader's credentials before they start copying their trades.
The ability to see what other traders are doing in real time is a real benefit of social trading. New traders have the opportunity to watch what other traders are doing and not just learn from them, but also make those trades themselves. In this regard, social trading can provide an exciting way to learn "on the job".
Trading can be a daunting, lonely affair when you're new and sitting at home in front of your computer. Again, the collective nature of social trading is an advantage. As traders share their knowledge and learn together, it can help build confidence in your own growing abilities.
One of the arguments made in favor of copy trading and mirror trading is that it keeps trading free of emotions. Investment decisions are best made with the head, not the heart, and the sometimes pressured nature of trading can sometimes lead to poor decisions.
By automating the process to your specifications, you can theoretically let the algorithms make trading decisions based on logic rather than emotion.
Although traders on social trading platforms are ranked according to their activity there, their trading retains hidden elements. For example, the top ranked traders whose activity you decide to copy may have a high success rate, but do not reveal any of the following:
The amount of their capital. They may have a large enough amount that they feel comfortable opening high-risk positions.
Whether their portfolio is highly diversified, allowing them to cover any losses they may incur on this platform.
Unless you really do your research, it is unlikely that you will be able to discover the nature and success of their off-platform trading activities.
Although social trading can give you a real sense of control, it can also lull less experienced traders into a false sense of security.
You must always remember that trading is never easy. There is always a risk and any system that claims to generate huge profits with little or no effort should be approached with caution. Social trading is no exception.
Although the process is increasingly becoming transparent and allows you to follow many different traders who seem to be successful, it's still possible to make big losses very quickly if you have no idea what you're doing.
This aspect follows from the last point. Imagine that you only follow the top ranked traders on the platform and the first trades you copied made profits without you having to do much.
In such situations, it's very easy to become overly confident and let the platform run on its own. However, most traders can experience big drawdowns and, if you haven't been keeping a close eye on the performance of the traders you subscribe to, you can too...
As mentioned above, they may have lots of capital to risk that you do not.
The only ways to hedge against potential losses via social trading are the same as with any other form of trading:
Please note that CFDs are complex instruments that come with a high risk of losing money quickly due to leverage. Also, past performances are in no way an indication of future results.