What is Social Trading?

Social trading

Social trading is a new way for retail traders and investors to get their start. It is based on the idea that the collective talent of hundreds of more experienced traders is better than the talent of a single trader. A social trading network connects traders worldwide, enabling them to share their insight on what's happening in the markets - as well as what they are trading - in real-time.

The first social networks of traders were based on online information and the sharing of ideas between traders. Today, these networks don't just feature the social aspect, they also provide automated trading. In other words, not only do these networks allow you to view, analyse and comment on the performances of real traders in real time, they also let you automatically copy their transactions. You can use this "social" information to make your own trades or you can decide to follow - and automatically copy - one or more traders in the social network (this is known as mirror trading).

A minority of traders manage to make a living on the forex market and you can find them through these social trading networks. These traders can open both long and short positions (of a forex currency pair, for example) and they can make money when the price goes up or down. Your performance is therefore not dependent on the general market trend (which is the case when you buy a share on the stock market), but on the experience of those who are providing the trading signals.

However, if YOU happen to be a good trader on your own, these social networks provide you with access to additional income through the sharing of your trades. The better your performance, the more investors will follow you, and the more commissions you will earn.

The following articles will guide you through the social trading landscape.

WARNING: social trading social involves the risk of losing money. Don't get involved in social trading if you have financial difficulties, the idea is to only invest money that you can afford to lose.

74% to 89% of individual trading accounts lose money trading CFDs.

Social trading tutorial

Here are a few articles to learn about and understand the various aspects of social trading and mirror trading.

-> Comparison of social / mirror trading platforms

-> What is a PAMM account?

-> Differences between social trading and mirror trading

arrow The difference between MAM and PAMM managed accounts

Duplitrade

Duplitrade is an automated mirror trading system that enables traders to automate their trades.

You just need to link a trading account with Duplitrade and then select the strategy providers that you want to follow.

MQL5

Launched in 2014, MQL5 is an online trading signal service that enables you to automatically copy the transactions of professional traders. This service is available on all MetaTrader trading software terminals.

-> MQL5 (our review)

FAQ on social trading

What is social trading?

Social trading refers to collaborative trading. It allows traders to observe and follow the trading strategies of their peers and replicate them as their own through a copy trading or mirror trading system.

How does social trading/copy trading work?

When you engage in social trading, you invest either in collaboration with the traders of a specific network or you apply their trading strategies for the benefit of your account. Collaborative trading involves obtaining trading information from these professional traders for free or for a fee. Using their strategies, on the other hand, involves observing their trading behavior and replicating their strategies on your account.

Is there a difference between social trading and copy trading/mirror trading ?

Social trading is an aspect of forex trading that involves both direct and indirect forms of collaborative trading. Copy-trading, also known as mirror trading, is a type of social trading that involves copying the trading strategies and market analysis behaviours of professional traders and applying them to your trading account.

How can I determine which is the best professional trader to copy?

Brokerage firms use specific criteria to identify professional traders. Nevertheless, some of the factors to keep in mind in determining a viable investor to copy include: 1. Their choice of markets, 2. Aggressiveness in trading, 3. Use of risk management practices, and 4. Percentage of wins and their biggest drawdown.

Does social trading expose my trading account balance to any risks?

Yes. Although you can get information and even copy the trading strategies of professional traders, your trades are not immune to risk if the traders you're copying initiate poor trades too often.

Must I always use the settings recommended by the trading professionals?

No, most forex brokerage firms and their social trading platforms allow customisation of copied strategies. For example, if you think your favorite professional trader is being too aggressive with his positions, you can use the risk management tools available to customise position sizes to suit your trading style.