Nowadays, learning to trade forex has become easier than ever, thanks to the internet and technology. There’s a wide range of resources available online; all you need is to find a credible and reliable source of information. Well, just to be sure to wipe out the bad sources from the good ones is to opt for one of the forms of trading: copy trading and social trading. Both of them are highly beneficial for making profits in a trading without going through a lot of hassle, such as doing fundamental and technical analysis. In this article, we are going to discuss the significant differences between the two.
Social Trading vs Copy Trading: How They Differ From Each Other?
Although many traders use both terms interchangeably, there exist major differences between the two. Therefore, social trading has a broader scope, while copy trading platform is just a part of it.
About Copy Trading
In copy trading, there are two major players; one is the signal/strategy provider, and the other is the signal/strategy follower. What makes copy trading different from social trading is that it is much more limiting and stricter in nature, whereby your account is bounded by that of the other trader. Trades can be opened and closed automatically at the strategy follower’s end. Similarly, the loss of the strategy provider is reflected in the strategy follower’s account.
About Social Trading
On the contrary, social trading works in a similar manner as social media. Here, the traders simply follow other traders to gain their real-time insights. Just understand this in this way: instead of selfies, traders post tips, ideas and strategies for their followers to replicate. In addition, in social trading, you are not required to link your trading account with that of the trader you are following, giving you more autonomy over trade execution.
Which One Of The Two Trading Options Is Best For You?
Copy Trading is suitable in the following situations:
- When the traders are new and want to learn more about forex basics and earn some profits by copying other traders.
- When the traders have no time to trade.
- When the professional traders want to earn more by letting other traders to copy them in exchange of commissions and performance fees.
- When the trader has the tendency to trade emotionally, with copy trading, they can hand over their portfolio to a professional trader to prevent poor decisions.
Social Trading is suitable in the following situations:
- When investors lack experience and want to learn the trading basics without risking their accounts; they can learn from the insights shared by other traders.
- When the traders only trade as a hobby, and their only aim is to engage with other trades, earning is just secondary.
- When the traders are more interested in identifying market trends and sentiments.
Therefore, the type of trader you are will help you determine what kind of trading is best suited for you.
How To Choose Between Copy Trading And Social Trading?
For traders serious about forex trading, social trading is an excellent way to gain knowledge from other traders and make their own trading decisions. This will eventually help them to boost their confidence and trading skills with time.
On the other hand, if your motto is only to earn without putting much effort, copy trading is the way to go. However, this does not mean you can take trading lightly and can just copy others. You have to remain cautious here too, but you indeed get a little wiggle.
Overall, copy trading is considered better than social trading; the reason is you can skip altogether all the efforts and time you need to devote to reading charts, monitoring news, analyzing your next moves and trading manually. Furthermore, when you compare the returns you get in exchange for the money, time and energy you are going to spend, copy trading will offer you more.
Choosing between copy trading and social trading is entirely up to you. With sufficient information, you will be able to make the right choice. If you still can’t decide, you can even choose to go with both.