Social vs Copy Trading

Today’s reality is that you just need to walk down the street on any given day to see the extent to which social media has taken over our lives. Eyes and ears are glued to cell phones and tablets and, among the younger generation, social media has simply become part of the daily routine. Like waking up and going to sleep. As the ability to access the internet became increasingly important, so the “smart” tools needed to gain such access have evolved into what they are today. Trading is no different. The late 90’s saw investment firms starting to invest heavily in technology. Gradually the market become the online beast that it is today with the result that the financial markets are accessible to more people and liquidity has steadily increased – as technology improves so the financial markets become far less of an “old boys club.”

With online social media platforms, such as with Facebook and Twitter, taking over the world as we know it, it was inevitable that social media would eventually also change the face of online trading. The result is that in the last 5 years we have seen the rise of “social trading” or “copy trading.” We generally find two types of amateur traders today. The first being a group of traders with a thirst to learn how to trade manually by attending as many education forums as possible. The second, a group of amateur traders that don’t necessary have the time or the interest to learn, yet still want to profit from the opportunity that online trading offers. Hence the exponential growth of copy trading.

Most amateur traders assume that social trading and copy trading differ only in terms of the use in colloquial language, but there are actually some subtle differences between the two.

Social Trading is suitable to the novice trader and caters to those that are looking for a trading idea. There are countless trading instruments and to analyse these opportunities can take hours. Social trading cuts the amount of time to find the opportunities. The novice FX trader is directed to the best probability trades through a collection of ideas supplied by more experienced traders. Social trading is effective for someone who is in the process of learning the market and would like some social support. It can be used to leverage other ideas and use them in conjunction with the user’s own ideas. The result that a trading decision can be reached using the analysis of the experienced trader as part of the decision-making process.

The popularity of copy trading has exploded in the last 5 years. Primarily, because it is suitable for individuals that have neither the time nor the interest to learn how to trade, yet still want to benefit from the financial markets. The best way to think of copy trading is not with the mind-set of a trader, but rather that of an investor. You will have the ability to analyse the risk parameters, the cost and the due diligence of the various trading strategies on offer. Copy trading offers an unparalleled level of transparency in the financial market industry and hence the reason for its popularity. Copy trading allows for the emotion and hassle to be taken out of the decision making process, yet still allows for the ability to manage a portfolio.

There are countless benefits to copy trading reported, but for this research report we highlight only the most significant. With a network of experienced forex traders, the novice trader has access to the same speed of execution of trade entry and potentially benefit from years of experience. Trading can be a lonely pursuit but the rise of copy trading has brought with it a distinctly social aspect. By copying an experienced trader with a strong track record, beginner traders who are new to the market and who lack the confidence to trade can benefit from trading opportunities whilst engaging in the learning process.

There are obviously a few cons to copy trading. For example, the fact that this form of “investing” has become so popular that we have seen some strategies that lack the information required for the novice to make an informed decision. Through our own research, we found that social trading platforms do come with an element of selection bias. Novices tend to follow the trader with the most followers, instead of following those traders whose statistics that best match expectations and personality.

By allowing the average person an entry into this form of investing, copy trading has effectively removed the barriers to investing in alternative assets for new-comers and experienced investors alike.

From our perspective, we are committed to deliver fundamental analysis, up-to-date educational content, daily forex trading ranges, educational webinars and morning videos that highlight trading opportunities. This way we can easily cater for the social trader looking to learn how to trade the markets. We will be introducing a copy trading platform in the New Year which will allow clients to follow experts. It is designed for those traders that want to take advantage of the financial markets, without the need to monitor these channels.

We will strive to eliminate the cons highlighted in this blog by creating a stringent monitoring process for experienced traders and displaying a transparent set of trading statistics to allow for good copy decisions. Our current resident trader has agreed to allow his own trading strategy to be copied. Going forward, we will also be looking to continually add value by engaging with further traders with an exemplary trade record who meet the selection criteria.

High Risk Investment Warning: Trading foreign exchange and/or contracts for difference on margin carries a high level of risk, and may not be suitable for all investors. The possibility exists that you could sustain a loss in excess of your deposited funds and therefore, you should not speculate with capital that you cannot afford to lose. Before deciding to trade the products offered by BlackStone Futures you should carefully consider your objectives, financial situation, needs and level of experience. You should be aware of all the risks associated with trading on margin. BlackStone Futures provides general advice that does not take into account your objectives, financial situation or needs. The content of this Website must not be construed as personal advice. BlackStone Futures recommends you seek advice from a separate financial advisor. Please take the time to read our Risk Disclosure Notice.

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