Crypto social trading is a modern approach that enables beginners or would-be traders to interact and replicate the trades of more seasoned crypto traders. This practice of copying trades allows followers to reap the high returns associated with day trading with minimal to no trading effort on their part. It merges social interaction with trading, ranging from discussing trades and strategies on social platforms or forums to duplicating the trades of other traders. The term "social trading" encompasses copy trading and mirror trading activities since traders replicate and mirror the actions of others.
How Crypto Social Trading Works
Although social trading platforms vary in their offerings, the fundamental principle remains the same: Investors replicate the trades of more experienced traders. These experienced traders are often referred to as leaders, while those copying the trades are known as followers. Let's delve into the details of how it works.
Copy Trading
Copy trading enables traders to replicate the trades of more experienced individuals, who, in turn, receive a predetermined amount or percentage as profit. In this form of social trading, you determine the amount you wish to invest, although platforms usually have a minimum investment requirement. You then automatically copy everything the leaders do in real-time. This approach is suitable for those with little to no knowledge of trading, as it does not require any input while still yielding the same returns as the traders they follow.
Signal Providers
Signal providers offer signals and trading tips to other traders. Sometimes, they use social media channels to deliver trading signals to their subscribers. A signal-providing service can also be automated, revealing market or traders' sentiments and utilizing technical indicators to provide real-time market information serving as trading signals. There is typically minimal interaction among traders on these platforms. Followers need some level of knowledge to comprehend and execute the signals provided.
Trading Forums
These platforms enable traders to interact before initiating trades. They discuss trading strategies and styles, entry and exit points, etc. Many trading platforms have forums where clients share their activities and learn from one another. This form of social trading helps beginner traders learn from more experienced ones. It also requires the follower to have a basic understanding of trading.
Advantages of Crypto Social Trading
Here are some benefits of crypto social trading:
- Convenient Start for Beginners: It takes time for beginners to navigate the crypto market and develop a reliable crypto trading strategy. Copy trading offers a more convenient way to enter the crypto market since you do not need to understand how the market operates to make money.
- Saves Time: Social trading saves time and effort because you can (potentially) make money without having to trade yourself. It can easily be combined with your daily activities or a full-time job. Some experienced traders also participate in social trading to earn passive income while engaging in other activities.
- Helps Traders Interact and Learn: Social trading facilitates association and interaction with other crypto traders, as seen in trading forums. Traders can discuss their thoughts about trades and then choose the one that seems the best. They can also learn from more successful traders by observing how they trade and conduct their analyses.
- Freedom to Choose the Best: Most copy trading platforms display the past trading performance of various professional traders, allowing you to select the one with the trading strategy or result with which you are most comfortable. This way, you can, to an extent, predict the type of result to expect. However, remember that past successes do not guarantee future results in trading. The fact that a trader has done well in the past does not guarantee that they will have good results in the future.
- Gives Some Control: Many social trading systems allow you to have some control over your account. You can opt out of trades that you are not confident about. You can also close losing trades to limit your losses. If you lose faith in a trader, there is always the opportunity to leave them for another.
- Potential Source of Income for Experienced Traders: Experienced traders can earn more than they would ordinarily by providing copy trading services or being signal providers. They could earn money by entering into a profit-sharing agreement with their clients or offering a subscription package to which their clients would constantly subscribe.
Disadvantages of Crypto Social Trading
Here are some drawbacks of engaging in crypto social trading:
- Potential Loss of Deposit: Professional traders can make mistakes or have losing streaks, leading to losing a significant part or even all of their capital. Inexperienced traders who have found it hard to achieve consistently good results through trading could create a signal-providing service to earn money. There is no doubt that traders following such signals cannot be successful in the long run.
- It Could Be Misleading: Social trading could be confusing or misleading, especially when suggestions from forums and signal providers do not confirm your analysis. Having suggestions from many people can also confuse traders and, in the long run, become unproductive.
- Inability to Master Trading: As much as you can learn to trade by studying and following successful traders, you might find it hard to carry out your trade analysis yourself due to your overreliance on professionals. This won't be an issue if you are okay with copying other people's trades, as long as they end in profit. However, if your goal is to master how to trade yourself, you should take your time to learn about the market, build your strategy, and continuously improve it.
Popular Cryptocurrency Social Trading Platforms
With the popularity of social trading and its effectiveness for traders, many crypto trading platforms have introduced social trading opportunities for their clients. Some platforms have also been developed specifically for this purpose. This section will consider four platforms where you can carry out crypto social trading activities.
- eToro: eToro is a social trading platform for trading multiple assets. It allows its clients to trade forex, stocks, commodities, and other CFDs in addition to cryptocurrencies. You can invest as little as $200 on the platform and copy up to 100 trades simultaneously. You can also invest up to $200,000 in one trader.
- Zignally: Zignally started in 2018 and later introduced its copy trading model-sharing mode. The profit-sharing model integrates professional traders, who use their trading capital to generate income for their followers. The platform provides investors with strategies, insight, and tools to choose the best digital asset managers.
- Shrimpy: Shrimpy started in 2018 as a crypto portfolio management platform where you can easily link all your exchanges and wallets to manage your crypto assets. Not long after, it introduced its social trading service to connect a community of crypto traders. To enjoy the social trading services, connect your exchange(s), view the leaderboard to find a leader that is right for you, and start to follow. In addition, the service allows the integration of more than 30 exchanges and wallets.
- CopyMe: CopyMe also lets investors copy traders automatically and in real time. You can follow one or multiple experts on the platform without sending out any funds. There is no profit sharing on CopyMe. You only have to pay the monthly subscription fee set by the expert trader(s) you follow. The platform supports exchanges like Binance and BitMEX.
Is Crypto Social Trading Worth a Try?
If you have not been able to achieve consistent trading success, don't have the time to trade, or want to diversify your portfolio, you should consider participating in crypto social trading. Over time, institutions and individuals with large funds have employed professionals to trade and handle their funds. Now, this opportunity is open to all through social trading.
Make sure you are patient enough to choose the right trader and strategy. In everything, do not forget that positive results are not always assured in trading.