Social & Copy Trading
Estimated Reading Time: 12 minutes
- Social Trading Platform – It’s a Computer System that copies your chosen expert trader’s trade automatically, means 100% passive.
- Transparency – Social trading platforms give you complete information to assess the credibility of the expert traders you follow.
- Key Players – eToro & Zulu Trade are the most established social trading platform providers.
- Fee – Basically you don’t pay any fee to the experts you follow, they get commission from the platform provider.
What’s Social & Copy Trading All About?
Social & Copy Trading Overview
Social trading is a type of investment that enables investors to observe specialist traders ‘ trading conduct and to use copy trading or mirror trading to follow their investment policies. The World Economic Forum has defined social trading as a low-cost, advanced solution to traditional wealth managers as requiring little or no understanding of financial markets.
How Social & Copy Trading Work
It’s in fact very simple concept, see the basic process as the below image;
Pick one of the finest social trading platforms (see later) that enable copy trading and share strategies etc. You can duplicate their trading activities with one click once you discover a lucrative trader with a solid track record.
As the above image shows, you as an investor chose the specialized experts in each investment category like Forex, Stocks & Commodities, and the precise same trade done by the experts will be replicated on your account automatically.
You can choose to copy trades using a set quantity depending on your risk tolerance, regardless of the original position size opened in the copied account. Alternatively, you can opt in proportion to your account balance to open trades. This way you keep the same amount of danger as the account you copied.
Can We Really Make Money?
Needless to say, this is essentially the most important point.
MIT Professor Alex “Sandy” Pentland said in the Deloitte Interview that “For instance, social learning on eToro’s trading network can improve the user’s return on investment by about 30 percent, which is huge. And this has been tested over millions of people, several years, and tens of millions of trades.”, quite interesting.
Social Copy Trading Platforms
For newbies to copy trading, it looks safer if you start up in either eToro or Zulu Trade because these 2 are by far the most established & reputable platforms. Those brief profiles are;
eToro – appropriate for novice traders, good education tool & friendly interface. eToro provides both the broker and social trading network functions (no use of a 3rd party broker), which gives you an advantage of almost no slippage – the weakness of copy trading compared with PAMM account as already explained, but remember spreads are not as competitive as some other brokers.
Watch a top trader’s advice;
Zulu Trade – ZuluTrade is an archrival to eToro. It supports over 40 outside brokers on top of AAAfx broker as its own broker. ZuluTrade receives compensation per trade per contract from the brokers connected within its peer-to-peer network and splits the compensation with the signal providers that have originated the trades which have been executed successfully on one or more live followers’ trading account.
- Company Name: ZuluTrade
- Description: ZuluTrade provide multiple automation and copy trading options across Forex, Indices, Stocks, Cryptocurrency and Commodities, and monitors and rates the performance of third party trading masterminds.
- Cost Model: ZuluTrade receives compensation per trade per contract from the brokers connected within its peer-to-peer network and splits the compensation with the signal providers that have originated the trades which have been executed successfully on one or more live followers’ trading account.
- Type: Private-Held Company
- Address: 14 Akti Kondyli, Piraeus, 18545 Greece
- Managements: Leon Yohai (CEO) / George Kollias / Yorgos Eliopoulos / Roula Pelehrinis
- Started: 2006
*For the technical facts of its integrated broker AAAFx account, see the 5 Steps To Start section.
You may want to watch the below 8-minutes video from the above article gives a brief idea about Zulu Trade as well as basic Forex market which will be educational for novice players;
eToro OR Zulu Trade?
Now, some of you may wonder which to be chosen, Zuru Trade or eTro? When it comes to the superiority of the final result, it fully depends on the quality of the traders you select to copy and the risk you’re willing to take, therefore no straight answers but simply put;
– eToro for Novice Players
– Zulu Trade for Experienced Players
Don’t get me wrong, I’m neither saying eToro doesn’t work for experienced players nor newbies can’t trade in Zulu Trade. My point is that eToro has advantage in simple setting & training resources which are good for novice players while ZuluTrade is strong in customized setting for trade & risk management which suit experienced players.
Regarding the comparison of these 2 social trading platforms, see the below comparison table, which I excerpted from fxsignalfactory.com (Click HERE) since I found it very comprehensive;
However, allow me to share some observation on the traders in each platform as follows;
The eToro traders seem to be longer term traders. They have to start trading with their own money (though once they get copiers they can trade with the bonus money they get) and tend to leave positions open over a longer duration of time. Because the trades in your eToro account are executed proportionally and you can only invest 20% maximum per single trader, your total account gains and losses will normally be smaller than with ZuluTrade. Because people can become traders on ZuluTrade using demo accounts and several use trading robots (which automatically execute trades) there tends to be a higher amount of risky traders on ZuluTrade.
However the choice of traders is much higher and some also use “real money” accounts. Traders on ZuluTrade also only get their commissions paid in months they’re profitable, so their incentive is to be consistent. In addition, the amount you risk is ultimately up to you depending on how much you invest per trade. In theory you can double your account in 1 day, though you’re also as likely to lose that money in 1 day if that’s the risk you take.
With regards to performance, if you’re looking for exceptional results and are willing to take the risk associated with it then ZuluTrade would be the better network because they allow you to leverage your capital more and take more risk per trader. If you want a more managed approach which automatically limits the risk you can take then eToro would be better solution.
Bottom-line, it’s difficult to call one of these networks better than the other. In the meantime, since both offers Free Demo Accounts, search the best traders using the above process and practice to see how it works with virtual money. Never ever put your hard working money before you feel comfortable & Confident. Once you get familiar with the system, you may have better idea about which is for you, or you may eventually want to use Both to achieve as a course of your Diversification.
Lastly, we always emphasize the risk-management. Remember, making money in investments for long-term is Not How To Win But How Not To Lose. Therefore, I always say Keep Participating In The Game is everything. If you loose your capital by following aggressive traders because of their impressive return, you will loose motivation to go back to the game thus loose opportunity to recover. So, good risk management will help preserve your capital and make sure that it grows as you practice social trading. Some of the key points for Sound Risk Management are;
Ensure the platform you select offers you the option to pause and resume copying a trader at anytime.
Never forget you trade with only a comfortable amount of capital and diversify that capital sensibly.
Consider how to allocate your capital into each trader very carefully. You need to remember the simple fact that the more traders you elect to copy, the more trades the system will be making on your behalf and so the more capital you will need to have available. Ensure you have sufficient capital in your account for all the trades that your chosen traders make or you need to limit your selection of traders.
As said before, slippage, the difference in price that is caused by the time difference between placing your order and having it executed is always an issue you have to keep in mind. Your trading may not be exactly the same as the trader you copy because this slippage. Although slippage should not cause much of a difference in your gain / loss in short-term, it may damage as time goes, therefore if the price moves too far away from your expert traders, the copying should be cancelled.
Let me repeat, there are significant risks involved in social trading and past performance is no indicator of future success. Some individuals have gone into social trading without truly understanding this and have ended up losing significant sums they could ill afford to lose. It is not uncommon for the top traders on networks to go through periods of consecutive / significant loses. This is why you should only ever trade with money that you can afford to lose. As with all investments, there is no guarantee of profit, or that you will not lose a part or all of your capital, so you should only allocate that amount of capital that you are comfortable investing. However, if you don’t start, you will never gain. Since you already understand how it works by now, I would strongly suggest you open social trading account & copy traders with fake money NOW. It’s very true, actual practice is the quickest & smallest way to be a master. You may choose either eToro (click HERE) or Zulu Trade (click HERE) to open Demo Account & Do Risk-Free Virtual Trading. Finally, Italian art dealer Giacomo Medici (the below photo at the Getty) made a significant role in the trafficking of the stolen arts and his operation was thought to be “one of the largest and most sophisticated antiquities networks in the world, responsible for illegally digging up and spiriting away thousands of top-drawer pieces and passing them on to the most elite end of the international art market“. I hope Social Trading will become (or actually has become) the largest and most sophisticated trading networks in the world, responsible for sharing the best elite trading expertises with the most ordinary & largest traders international forex market.
Social Copy Trading is the 1st of 3 Passive Trading, the others are;
Just in case you are skeptical about trading Forex PASSIVELY, suggest you first read the below report;
【Select Trusted Forex Brokers With No Hidden Agenda 】 Click HERE, which gives you good insight on how it works.