Social Trading Explained: Should You Copy Other Investors?

There has been lots of buzz and excitement around the crypto market over the past couple of years. This has largely been generated by sharp rises in some of the most popular cryptocurrencies, including Bitcoin and Ethereum.

Even crypto-sceptics are dipping their toes into the unpredictable world of crypto investing – and many seasoned investors are beginning to realize that the playing field is drastically different from what they are used to. Cryptocurrencies are unpredictable. They can skyrocket in value over a matter of hours, but they can crash back down just as quickly.

As the crypto community has continued to grow, ‘social trading’ has been becoming increasingly popular.

Social trading involves the free sharing and using of information between a group of traders. As well as providing traders with a community, its purpose is to give novice traders the ability to learn from and replicate expert traders, without having to spend years building up their knowledge and losing money through trial-and-error.

What is social trading, and how does it work?

Social trading platforms are essentially social networking platforms built especially for traders. Before they emerged, traders had to rely on their own research and technical analysis to figure out what they should invest their money into.

Now, novice traders, or traders who don’t have the time or expertise to sit in front of charts and analyze markets, can learn from traders who have more experience than them. What’s more, they can copy these trading strategies, and reap the benefits. Essentially, users can become profitable traders by simply replicating the positions of other traders.

There are three main types of trades on a social trading platform. The first is a single trade, which means that the user places a normal trade by themself. The second is a copy trade, which means that a trader places exactly the same trade as another trader. The third is a mirror trade, which means that a trader follows all of the trading activities of another trader, and automatically excuses them.

As a result, there are multiple ways to use social trading platforms. Users can choose to either choose to automatically copy all of a trader’s existing positions, they can choose to copy all of the trader’s future positions, or they can decide to manually select which trades they’d like to copy.

How has social trading evolved over the years?

Social trading as we know it today first began in 2010, when one of the first social trading platforms, eToro, was created. It was soon followed by Wikifolo in 2012.

The concept of social trading began to gain mainstream traction in 2015, when a World Economic Forum...

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