Social Trading: what is? | Does it work?
Published: June 25, 2021 by Andrew
Social trading is a perfect tool for beginners who want to learn how to trade by comparing themselves with industry professionals. At the same time it is great for professionals themselves to stay in touch with colleagues and further enhance their skills.
In this guide, we explain in detail what is meant by social trading, which are the best systems and what are the risks.
If you want to do social trading you have to be very careful about scams. One of the very few safe and reliable social trading platforms is eToro.
|What is:||A mix between social network and trading platform|
|What you can do:||Confrontation with other traders / Copy their trades|
|Who can do it:||Everyone|
|Capital needed to star:||250 €|
|Free Demo account:||Yes|
By now everyone knows it: it is an authorized and regulated online trading platform but it is also the largest social network of traders in the world. The most loved feature of eToro is the ability to copy, in a fully automatic way, what the best traders do.
In this way, novice traders achieve two goals: they immediately get, from the very first day, the same results as the best professional traders. And they can learn from these great traders (if they want).You can sign up for free at eToro by clicking here
The very concept of social trading was invented by eToro, the others just tried to copy.
What is Social Trading
We now live in the age of social networks: most people spend hours, every day, peeking into other people’s lives. Facebook, Instagram, TikTok and Twitter (and others) have drastically changed our personal life and the way we inform ourselves.
We can define social trading as the merger between a social network and a traditional trading platform.
On a social trading platform, therefore, it is possible to trade online but also to follow the opinions of other traders. And above all it is possible to copy, in a completely automatic way, what the best traders do. This particular component of social trading is called Copytrading.
To fully understand the power of the concept, we need to deepen an important concept: the fact that each registered trader has in his profile, if he wants, information on the profits made in the past with trading.
In this way, other traders can know whether it is worth copying or not and can also determine if his opinion is worth or not.
To understand: one thing is the opinion of Warren Buffett or Ray Dalio, very different is that of an aspiring trader boy who discovered from a cousin the possibility of making money online with trading and, after 3 days, feels he knows everything and dispenses advice and opinions, perhaps raving about Bollinger Bands and Adx without having absolutely no idea what they are.
Social Trading Platform: eToro
At this point we can begin to analyze the most loved aspect of social trading, the possibility of copying the best traders in the world.
Choose the financial markets on which you would prefer to intervene (stocks, commodities, forex, cryptocurrencies, …), check the investments in real time of the best traders and choose who and how much to invest.
When you risk money, you can’t play. That’s why we refer directly to eToro which is the only truly serious and reliable platform.
The novice trader can be led to think that copying is easy – just choose the trader who has earned the most in the past and follow him.
Things in life are not as easy as in dreams. There is no best trader in the world but only traders who have achieved good results in the past, in those particular conditions that may be different from current and future ones.
Then yes, it is true, those who have earned in the past will also do so in the future but we can all make mistakes, no one is perfect.
How to do Social Trading
What does this mean? You simply cannot limit yourself to just copying one trader.
Understanding which traders to follow can be compared to a real trading strategy.
Anyone who wants to do social trading effectively must spend time and patience in selecting a good group of experienced traders to copy. In this way, even if one is wrong (or is not as good as he seemed) the profits generated by others can more than compensate for the losses of him.
It is also advisable to diversify the reference markets on which the various copied traders operate in order to have the certainty of seizing (indirectly) all the opportunities of the market.
The approach to risk must also be balanced: there are professional traders who are very conservative, others who risk a lot to earn a lot. Our copy trader portfolio must contain both types.
We have already said that everyone can make mistakes: but if some copied trader makes mistakes often, it means that he was not as good as we thought. No problem – just stop copying it.
This makes us understand that the answer to the question Who to Copy on eToro? it is a continuous process: it is necessary to dedicate time at the beginning to choose the traders who have obtained the best results, time to verify, day after day, that the results generated are good and more time to look for other talents to copy.
Those who thought that social trading was a way of making easy money must change their mind: only scammers are talking about easy money, eToro even warns of the risks of trading, other than easy money!You can sign up for free on eToro by clicking here
The other great opportunity offered to us by a good social trading platform is to get in touch with other, possibly more experienced, traders.
Learning to trade by following the best is a smart goal and, typically, traders have tried using online trading forums to try to achieve it.
It is a pity, however, that the forums have serious flaws and are very risky. The main problem lies in the fact that anyone can register on the forums, just a bogus email to create a profile.
This means that forums typically have a lot of scammers signing up trying to lure the naïve would-be traders into their dangerous network. They can do this because they know they risk nothing as they are virtually untraceable.
If that’s not enough, on the forums everyone can pose as great traders, market experts. There are many bankrupts, people who have lost a lot of money and ruined themselves with online trading, who write that they are millionaires and offer advice to the less experienced. Obviously, those who follow the advice of a failure end up failing.
Why do they do it? Excluding scammers and trading course sellers (assuming these two categories are different), they do it to enhance their frustrated egos.
Those looking for information or the opinions of other traders on a reliable social trading platform such as eToro do not have these problems.
First of all, there are no scammers: to register on eToro you need to verify your identity, a scammer would be immediately discovered and reported.
Furthermore, all users have in their profile the data on the operations carried out in the past: in this way it is very easy to distinguish those who boast empty from those who actually manage to make money with online trading.
Social Trading works?
What are the main advantages of social trading? There is no point in hiding: the vast majority of beginners who start do so simply because they are in a hurry to start earning with trading and want the same results as professional traders right away.
There is nothing wrong with this but it must always be borne in mind that social trading has perhaps an even greater advantage: it is one of the most powerful tools for learning (really) online trading.
Having the opportunity to observe live what the best professional traders in the world are doing, to be able to read what they write in their profile, to get in touch with them are things that are priceless.
The beauty is that the best social trading platform in the world, eToro, is completely free and requires no payment for all these benefits.
What do experienced traders gain?
One of the elements that most of all signals the failure of online trading forums is the fact that truly experienced traders have no time to waste on forums: they are too busy making money from trading to have time to waste time on forums.
On the other hand, on eToro Popular Investors are truly expert traders. Why do they find the time to help the less experienced? How come they give permission to copy their operations?
Simply, eToro pays them. In practice, these great traders, in addition to the normal profits they manage to obtain on the market, are also rewarded by the platform with a sum of money that is proportional to the number of followers.
In other words: the more they are copied, the more they earn. That’s why they are so helpful with less experienced traders!
Social Trading Opinions
What is social trading really? There are so many opinions and many are wrong.
First, we must deny that this is a scam. Of course, there are many scams and they are also quite serious but it is not social trading itself that is a scam.
The fact is that people now believe they can make money easily and therefore are easy prey for those who promise social trading systems that would make easy money without any kind of commitment. Precisely the scammers.
Avoiding scams is not difficult, indeed: just contact eToro which is safe (and is the origin of the very concept of social trading).
Another completely wrong opinion is that social trading is a way to make easy money. Now, it must be clear that these are expressions typically used by scammers.
Surely you can earn (even a lot) but it is essential to remember that money is never easy, it is always the result of commitment and dedication.
Unfortunately this opinion is used by scammers to persuade the most naïve to enter their dangerous systems …
Social Trading Demo
Before starting social trading with a platform, it may be worth trying a free demo account.
What is the Demo? It is a platform equal in all respects to the real platform but with the difference that it is traded with virtual money. In practice, doing social trading demos is a way to learn how to use the interface of the platform and also to be sure that the system really works.
Obviously, those who use a platform like eToro usually work very little in demo, just long enough to learn the basic mechanisms. In the end everyone knows that eToro works.
Social trading is a great opportunity for novice traders – they can quickly achieve the same results as the best traders in the world, and perhaps most importantly, they can seriously learn online trading.
Unfortunately, not all social trading platforms are trustworthy and there are also scams. The only platform we recommend is eToro: it is free, safe, reliable and really simple to use.
Among other things, members receive free phone assistance and can therefore easily resolve any doubts. You can sign up for free on eToro by clicking here.
It is the fusion between the concept of a trading platform and that of a social network. In practice, a social trading platform allows you to copy the operations of other traders and exchange opinions with them.
The only platform that can be trusted is eToro. Among other things, this concept was developed by eToro, the others have only copied.
Unfortunately there are also scammers who have created fake social trading systems, they must be avoided at all costs.
It takes time and patience to select traders to copy and to constantly monitor their trades. It also takes a minimum of strategy to diversify the types of Popular Investors that you follow.
Yes, as long as you use a platform that is authorized and regulated in a European country and that has been registered in Italy by CONSOB.