The forex industry is a constantly changing field, where one minute you are making profits and the next, significant losses. This element of fluctuation has introduced the desire to have strategies to help cut losses and reduce risks. With all the signal sources and trading tips available, forex trading can still overwhelm even a highly-skilled, veteran trader.
Copy-trading software and social trading have become increasingly popular among traders. Read further to understand them individually and know what differentiates the two.
What is Social Trading?
It is a simple way for beginner or inexperienced traders to learn and invest based on interacting with experienced traders or peers. This is possible through a social trading network, where all traders, regardless of their experience and expertise, collectively share trading tips and insights.
Traders in a social trading network communicate back and forth with their preferred peers or traders. They share strategies and technical analysis, hoping to better their individual skills in trading.
Social trading can be time-consuming for beginner traders. It also comes with biased human errors.
Social trading is suited towards an individual who wants to learn and gain more insight into the trading platform. Fortunately, this significantly cuts the amount of time it takes a beginner or inexperienced trader to analyze the market. This is because the social trading network offers the trader a collection of ideas from different traders who have studied the market and make decisions based on current and past market trends.
It is an effective way of trading for an individual learning the market and needs a social support system.
How is Social Trading Related to Copy Trading Software?
There is a powerful correlation between social trading and copy trading. However, they are distinct in their own rights and should not be mixed.
In a nutshell, social trading allows traders to copy the market movements of other traders. This is almost a similar concept in copy trading. However, what makes social trading unique from copy trading is the added element of social interactions.
The element of communication adds an extra dynamic layer to the trading process, thus increasing its effectiveness.
What is Copy Trading?
Copy trading is just as the name suggests. Whether you are a beginner or an expert, you can copy another trader’s strategies and trades to reduce heavy losses.
However, unlike social trading, in copy trading, there is no social element. As a copy trader, you are getting down to the cold hard facts and technical analysis that make part of successful trading.
Copy traders automatically replicate trades based on expert traders. These expert traders have undergone thorough testing and chosen by third parties or regulated companies.
Copy trading is ideal for individuals that prefer the market but lack the time and possibly the will to learn how to trade it.
Think of copy trading as an ideal or simpler form of investing instead of trading. Most people approach copy trading with the mindset of an investor and not an expert trader.
Copy-trading provides an unrivaled high level of control and transparency in the financial industry. As such, it is gaining more popularity than social trading today. The AllMarketsTrading platform provides traders with cutting-edge copy trading software. This makes the copy trading network more popular than the alternative.
What is the Difference Between the Two?
Social trading allows an individual to copy an idea or trade from another individual in the social trading network. On the other hand, copy trading is the ability to copy an entire strategy from another trader. The copied strategy can be pre-vetted or self-picked by a community of traders. The act of copying is performed to the entire strategy and not individual ideas or traders.
In social trading, the tips, insights, and information you gather from other traders are merely used as part of the decision-making process. One of the risks of copy trading is entering a situation where the blinded individuals are misleading the even more blinded individuals.
On the other hand, copy trading leaves no room for doubt, especially if you are using copy trading software. The decision is usually already made by the trader you intend to copy. It is either you copy or not, unlike social trading, where you are gathering tips and insights from different, possibly uninformed individuals.
Which is the Best Alternative Between the Two?
Based on the pros of using computer-based algorithms and the unpredictable amount of time it takes to trade forex manually, most traders prefer copy trading to social trading. Under scrutiny, there is no much difference between the two, except the existence of a social structure in social trading and lack thereof in copy trading.
The time required to trade forex manually and efficiently while realizing a profitable ROI is so huge that most traders don’t have the luxury. As such, copy trading is the best alternative to minimize the time one would take to research and discuss with other traders before finally making a trade.
Ultimately, what is important is to take advantage of the tools offered by copy trading. Copy-trading software is one of the perks of a copy trading network. Moreover, finding a reliable and trustworthy service provider for your copy trading will help you appreciate the difference between social trading and copy trading.
AllMarketsTrading is a platform that provides you with these capabilities, backed by the best traders, technology, and excellent customer support. This is why traders are massively migrating from some of the top social trading platforms to come and take advantage of our advanced automated trading capabilities.
However, some trading platforms incorporate both social and copy trading features. You will have access to some of the top traders and also be able to interact with peers or expert traders.
Differentiating social trading and copy trading can be a challenge for some since, depending on the trading platform, they share the common features of copy trading. However, to better understand the difference, study the different trading platforms.
A social trading platform has an added social interactions feature, where traders can interact and share insights. On the other hand, a copy trading network tends to lack this added feature. Copy-trading has the added advantage of a copy trading software that helps traders minimize risks while trading in the most liquid markets.