Social Trading isn’t a new concept, as the idea has existed since 2008. It very quickly gained traction with traders and soon became a staple across broker offerings. The term Social Trading covers a broad category of products. While these all fall within the social trading concept, they do have differences in the approach and methodology.
Copy trading is the most common form of social trading, where traders can automatically copy the trades of other traders they follow. This type of social trading is popular because it requires little effort or knowledge from the follower. Instead, they choose a trader they wish to follow, and their platform will automatically replicate their trades.
The advantages of copy trading are that it allows traders to access the expertise of more experienced traders. In addition, it can save time by eliminating the need for research and analysis. However, there are risks involved with copy trading, as traders must choose the right traders to follow, and they may not always perform as expected.
Mirror trading is similar to copy trading but involves a more automated approach. In mirror trading, traders can set up a mirror account, which will automatically replicate the trades of a chosen trader. The difference between copy and mirror trading is that mirror trading is based on algorithms that automatically execute trades. By contrast, copy trading is based on manual selection by the trader.
Mirror trading is popular among traders who prefer a more automated approach. In addition, it can be helpful for those who need more time or knowledge to monitor the markets closely. However, choosing the right trader to mirror is essential, as the mirror account’s performance depends on the trader’s mirrored performance.
Social Trading Networks
Social trading networks allow traders to interact with each other, share information and insights on the markets, and follow the trades of other traders. These platforms typically provide a range of features, such as forums, chat rooms, and news feeds, allowing traders to connect and collaborate.
Social networks are popular among traders who want to learn from other traders, as they can ask questions, share ideas, and get feedback on their trading strategies. They can also be helpful for experienced traders, who can use these networks to expand their knowledge and share their expertise with others.
Crowdsourced trading is a type of social trading where traders pool their money together to invest in a particular asset. This approach allows traders to access more significant amounts of capital, which can be used to make more significant investments. Crowdsourced trading can also reduce the risks associated with individual trading, as the investment is spread across a more significant number of traders.
However, there are risks associated with crowdsourced trading, as traders must trust each other to make wise investment decisions. Therefore, choosing the right group of traders to work with and establishing clear guidelines and expectations for how the investment will be managed is essential.
Social Media such as Facebook and Twitter had a lot to do with the rise in popularity of Social Trading. Social Media is everywhere, and users have become much more accustomed to the concepts of community and followers. Social Trading is a way for experienced traders to mirror the influencers of the social media world and showcase their trading results.
Most platforms will allow users to search the available trade strategies and grade them based on their requirements. Users can choose to follow strategy providers based on various parameters, including risk profile, trade volume, trade assets, and many others.
Interest in Social Trading has been growing again over the last few years, following a slight drop in 2019. This trend continues into 2023, and a quick look at the numbers from Google Trends confirms that.
Social Trading is one of those things retail clients look for when choosing a new broker to open an account with. Potential depositors might need help understanding the benefits of Social Trading, but they will look for brokers who offer it.
Brokers who offer these products will have an advantage over their competitors, as more and more retail clients are looking for this service. The ability to follow experienced traders and copy their strategies can be a great way to get started in the markets, especially for those with limited trading knowledge and experience.
Social Trading can also be an advantage for experienced traders who can follow the strategies of other traders and even use them as inspiration for their own strategies. As the trend of Social Trading continues to grow, more and more brokers are likely to offer it in the future.
Over the last few months, one of the standout developments has been the rise of AI applications such as ChatGPT. ChatGPT is everywhere, even in the latest episode of South Park! That rise in AI applications is one of the drivers behind the increased interest in Social Trading, as traders associate Social Trading with AI portals.
While not a massive driver of trading volume, almost 50% of all brokers offer social platforms of one type or another.
At PLUGIT, we’ve developed our Copy Trading plugin for MT4 and MT5. With a comprehensive list of features, this tried and tested solution features an advanced management portal and multi-account management capabilities. In addition, with eight distinct allocation methods, the PLUGIT Copy Trading platform offers brokers access to a new retail market segment at a fraction of the cost of other comparable systems.
We’ve been offering cutting-edge solutions since 2012, and the PLUGIT range of intelligent solutions lies at the heart of over one hundred of the leading brokers in the world. Our onboarding specialists are available for a no-obligation demo of the power of PLUGIT, so why not contact us today and take your brokerage to the next level in 2023?