Top 5 Social Trading Platforms Worth Investing in
Most successful traders are extremely secretive about their strategies. For a very long time this has put other investors at a disadvantage. That’s when the concept of social trading appeared. At present, social networking and online trading are the internet’s leading activities, so it was only a matter of time until someone came up with a combination between the two.
Social trading is a growing phenomenon through which online traders make trading decisions based on financial data gathered from multiple web platforms.
This merging of traditional forex trading (foreign exchange marketplace where currencies are traded) and social media networking has revolutionized modern trading by allowing traders with less experience to enter the market with a reasonable expectation of success. That’s because they can actually mimic and execute the strategies of seasoned traders.
There are quite a handful of social trading platforms at the moment, most of them sharing useful information. The only caveat is that the act of copying a strategy can be just as risky as any other form of trading.
With these things in mind let’s take a look at the best social trading platforms.
Etoro is one of the earliest innovators of social trading. The Cyprus-based company, which has opened offices across the United States, Australia and the United Kingdom, is currently one of the most prolific social trading platforms. Etoro offers 3 types of services (WebTrader, OpenBook,Mobile Trading) and is one of the easiest to operate trading platforms.
How it Works
The advantages of eToro include, but are not limited, to the ability to follow and copy the activities of experts and responsible trading through the Guardian Angel software. Let’s take a closer look at the three types of services available on eToro:
- eToro WebTrader: through the WebTrader platform users can trade from anywhere in the world as long as they have internet access. The interface is extremely clean and sleek, making it easy for beginners to get started. eToro avoids informational overload by effectively organizing vital information. Unlike other platforms, eToro provides a chat function that makes it possible for traders to interact with other traders.
- eToro OpenBook: this function was introduced to eToro in an effort to add a social element to the trading environment. From the OpenBook users can see what traders are doing in real time. This makes it possible for traders to see what kind of strategies are effective, or to gain more insight for new ones. Because OpenBook features a strong social networking element the learning curve is shortened considerably.
- Mobile Trading App: this feature does exactly as the name suggests. It allows traders to stay connected with their investments from their mobile devices. This means that they can trade from anywhere, without being tied to a PC terminal.
Trading Accounts and Reliability
Like most social trading platforms, eToro is not a broker, so you will have to open an account with one of its approved brokers before you can fully utilize the services.
There are four types of trading accounts, catering to different clientele:
- bronze trading account (basic),
- silver trading account (intermediate),
- gold trading (advance),
- and VIP trading (professional).
The concept behind this system is simple: the more money you invest, the more features and benefits you will enjoy.
For a social trading platform to be considered reliable it must offer seamless experience for trading, funding and withdrawing profits. In this regard eToro performs masterfully. Traders can deposit funds by using their card, Western Union wire transfer or an online payment processor like Webmoney, Moneygram, Paypal or Netteller.
All in all, eToro is a solid platform that is setting new benchmarks for Forex brokers to follow. Regardless of whether you are a novice or professional trader, the OpenBook network, eToropedia and numerous other features will ensure that you stand to gain from trading in Forex on eToro.
Number two on our list of social trading platforms is ZuluTrade. The New York-based platform is similar to eToro in that it isn’t a broker itself, but it makes money through partnerships with its supported brokers. If you want to experiment with social trading, you should definitely consider ZuluTrade because it offers a free fully-functioning demo.
Traders can also invest small sums of money (example: $300). On the other hand, the openness of the service can be considered somewhat of a drawback for some, because it makes it more difficult to find successful traders (there are over 10.000 forex traders at the moment).
Although some Forex trading knowledge is required, it’s very possible to make money through this platform. ZuluTrade isn’t an exclusive ‘Forex’ trading platform. Starting with 2015, they introduced binary options for those who wish to trade themselves or to copy other strategies. Trade indicators and signals are, hopefully, provided by experienced traders, but because this is survival of the fittest, due diligence is needed. ZuluTrade offers a powerful search engine that will help you sort through the huge number of traders.
How it Works
ZuluTrade performs trade execution instructions through your chosen broker. This makes it possible for you to closely replicate the trades on your provider’s account. In other words, if your trader is successful, you should –in theory- register the same success. ZuluTrade works with a fee-per-trade basis, meaning that you will pay 1.5 pips per lot traded, plus the broker’s spread. One thing I appreciate about the payment system is that signal providers are not compensated when their monthly P&L is negative. So they are highly incentivized to produce good results.
How to Follow or Copy:
There is a wealth of information available on the platform to help you choose the right signal provider. In my opinion, the key elements that you need to examine are maximum drawdown, number of weeks since the signal hsas been running, maximum open trades, average trade time and best vs. worst trade. This should give you a good idea on the overall performance of the signal as well as its risk factors.
ZuluTrade allows users to configure every element of the trade signal (example: lots size per trade, limits, stop losses, maximum open trades etc.), personalizing it to your account size and risk tolerance.
On Signal Trader investors can connect with expert forex traders and copy their strategies. The social trading platform was launched in 2009. Despite the fact that Signal Trader isn’t a broker itself, it is currently collaborating with 15 partner brokers, which service different countries.
New users can create a demo account for the first 31 days. For the sign-up procedure users have to enter their MT4 credentials from the broker of choice.
How it Works
One thing worth nothing is the fact that you will need at least $2.000 (or the equivalent) in the trading account to be able to connect to Signal Trader. Once the account is ready you can start following and copying forex traders (referred to as ‘Trading Systems’). Unlike other platforms, Signal Trader only features traders who risk their own money and have a minimum balance of $8,000 (or the equivalent).
These traders are carefully monitored (historical data of their balance) and they also have to pass an evaluation process before they are accepted as traders (positive returns over 3% and drawdown under 15%). Looking over the systems I noted that most of them have open trades longer than a week, meaning that they are medium to long-term traders with powerful risk management skills.
Who to Follow or Copy
You can view the summary of most trading systems on one screen. This overview screen displays information such as net profit amount, life-time net P/L%, profit factor, number of followers, profit chart and total weeks trading. Clicking on a specific trading system will pull-out more detailed information about it, such as strategy, real-time open and closed trades, historical performance indicators etc. This will help you make an educated decision.
OANDA is one of the early pioneers of online forex brokers. The company was established in 1990 but it entered the social trading scene after acquiring Currensee in September 2013. After six months of development work on the platform, OANDA announced that it had completely integrated its own trading platform into Currensee, thus ceasing its ‘Trade Leaders Program (OTLP)’.
The reasoning behind Oanda’s acquisition was to provide traders with more opportunities to become successful. The new OANDA platform will continue to focus on the principles of premium educational resources, superior execution and competitive spreads.
Like many social trading platforms, OANDA has received its fair share of forum bashing from angry investors, but this doesn’t that it’s not a solid service. As a matter of fact, some reports claim that Oanda has a higher profit percentage than other online brokers.
How it Works
OANDA is suitable for any type of broker because it does not require a minimum deposit. So if you’re thinking about opening an account and playing around with a small sum, this platform is definitely a good choice. On OANDA users can trade more than 60 currency pairs with leverages of 20:1 or 50:1.
“Some companies may offer 100:1 leverage, or even 200:1, but OANDA believes these levels are far too risky and could cause clients to lose all their funds very quickly. Serious professionals seldom trade at those levels of risk.” Source: Finance Magnates
The platform accepts payments through credit card, debit card, check or wire transfer. It also created a product called fxTrade, which offers practice accounts to clients. Other features include mobile phone apps, Google Chrome extension and forex API. All in all, OANDA is a good social trading platform where many people actually make money. As long as you know how and when to invest your money, OANDA should be helpful.
Communitraders is a brand-new binary options demo platform with an extremely active and useful forum. The idea behind C.T. is the developer’s belief that wisdom of the crowd is the secret to trading success. C.T. was developed by the BOTS team and launched in beta version in 2013. It is now available as a full service binary social and copy trading platform. According to trading experts, Communitraders is the most advanced social and demo platform for binary options.
Arguably the most important feature of C.T. is the forum, where users can find other traders and useful information about Binary Options Strategies, or Trading signals and tips. The forum is broken down into multiple sections and sub-forums with trades connected to them. This means that you can actually reply to a C.T. sub-forum with a trade.
How it Works
Although the C.T. platforms offers a plethora of advanced features it is user-friendly and easy to navigate. You must enter your title, asset, trading style, trade amount and expiry to begin. You are free to create your own trades, or you can follow the trades and suggestions of others. If other users choose to follow your trades you will earn money. Pretty cool.
Who to Follow
Communitraders is an excellent choice of demo platform because you can benefit of all its features for free. Simply join the forum to get started. There are no deposit requirements, limits on trade volumes or time. Another neat feature is the platform’s versatility. C.T. is not tied to any binary options platforms, so users are free to test the types of trading they want.
Each account has its own performance report. I suggest following traders with solid performance reports over a lengthier period of time. You don’t have to copy their entire strategies. Simply focus on their best performing assets. Alternatively, you can work together with other traders to achieve common goals and ambitions. People have always found strength in numbers, and binary options trading is no exception to this rule.
Image Sources: Author’s Own
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