How to choose the best social trading platform
An excellent broker is an indispensable tool for every trader! Do you need to choose a reliable social broker or social trading platform? This article is a must read and covers the most important considerations.’
Size and number of users
A fundamental feature of social trading platforms is that they allow you to leverage the knowledge of others who trade the same platform. It is understandable that the more other users, the more knowledge and opportunities to tour. Moreover, studies have shown that the greater the diversity of trading styles and techniques present in the network, the greater the opportunity for all network members to create balanced and profitable or manual trading portfolios
Size matters – a great social mediator often offers more benefits.
On the other hand, when the network consists of a smaller number of traders, the choice of trading styles is understandably narrower and tends to create a “trading copy bubble”, with a large percentage of traders in the network all copying the same handful and therefore no way to protect investment if there is a chance that these merchants will fail.
New to social trading? See
Of course, the larger and more popular the platform for social trading, the more it is subject to regulatory oversight. As a trader, this means that there will be no risk of shady trade manipulations, conflicts of interest and all the countless other types of online fraud. Just in case, it is always recommended that you read a few reviews about social trading before you decide to sign up.
Commission structure for copied traders / popular investors
Different social brokers have different commission structures in terms of earnings of popular investors (copied traders). For example , a really popular broker / broker in social trading, offers a copied trade a fixed fee of 0.5 pips for round rotation trading (except for traders with American followers, who are reimbursed by a variable monthly membership fee). This means that for each standard lot copied by people who copy these traders, the copied traders will receive about $ 5.
Investors and traders should be aware that the different commission structures offered to copied traders can affect the way these traders manage their portfolio.
ZuluTrade is an excellent social broker and offers a variety of features and tools for forex trading.
eToro, another fantastic social broker compensates its popular investors in a variety of ways, including the following:
- Fixed monthly payments according to the level of a popular investor.
- Commission of 2% on the annual amount in dollar under management (AUM). (Only for popular investors at the elite level).
- Rapid rebates up to 100%.
- Monthly marketing fees.
- Quarterly education fees.
- Extras for annual events.
* All of the above benefits, fixed payments and commissions depend on the level of each popular investor.
Trading financial instruments
The variety of assets offered by social brokers is an important consideration when choosing a social broker. The variety of financial instruments offered by social brokers affects the level of diversification that traders and investors can achieve. Also, this can have a significant effect on earning potential as a wider range of traded instruments could provide more earning opportunities.
* Recommended reading:
Compatible brokers and trading platforms
ZuluTrade is a social broker / facilitator that connects with various forex brokers through the MT4 trading platform. This means that traders can use their own broker’s MT4 trading platform to trade with ZuluTrade. ZuluTrade also offers its own trading platform called the ZuluTrade platform.
On the other hand, eToro and Ayondo only offer their own trading platforms (eToro and TradeHub platform). These platforms are better equipped for social trading than MT4, but many users prefer MT4 because they are used to it and may have an MT4 expert advisor that they use to provide trading signals to followers who copy their stores.
Does automated trading allow a social intermediary?
Some social brokers like ZuluTrade allow automated trading with expert advisors (trading robots). Both manual and automated trading have their advantages and disadvantages. Copy traders and photocopiers may have different preferences and opinions about automated trading and should be sure that automated trading allows their social intermediary if they want to use it.
* Don’t know how to approach copy trading? See for some helpful tips.
Are copies of trading signals from demo accounts allowed?
Many social brokers require copied traders / popular investors to give their trading signals from a real money trading account. An example of such a social mediator is eToro. Then, other brokers like ZuluTrade and Ayonda allow copied traders to give a signal to trade a demo account.
With Ayond’s quantity-based fee option for their best traders (copied traders), these traders can use a demo or live account to provide a trading signal.
While traders and investors who copy other traders generally like to copy traders who trade from real trading accounts, there are certainly copied traders who use demo accounts that have really good performance. Merchants should not necessarily exclude copied merchants using demo accounts. In the end, performance is what really matters.Spreads and commissions
Social brokers usually charge a little more commission than trades than standard retail brokers. The difference is usually not too great and when the great benefits of social trade are taken into account, this extra cost really pays off. Traders looking to engage in social trading may want to compare the range and commissions between different social brokers.
Another major criterion by which social trading platforms differ greatly is the amount of information they provide about each trader, including of course themselves, once they sign up. Although the whole raison deth of social trading platforms is to provide information about trading to others, some share more data than others or in a more transparent way.
It is rare, for example, for social trading platforms to display the entire user history of trading by trades, as it would be too inconvenient to scroll. So while the closing and opening positions will be displayed on your feed, there will be no records of closed positions that will be viewed later for each individual trader. Instead, past data is aggregated into statistics, usually presented through various charts and graphs, to make it easier for you to measure each trader’s performance. This is where things get a little complicated because this type of data can be presented in a million different ways, some of which are very misleading.
eToro has excellent analytical tools and accurately conveys the performance of retailers.
The best social trading platforms provide you with statistics that reflect the probability of success of each trader based on past results, while the worst among them try to raise the performance of their traders to attract unconscious photocopiers. As we discussed in our article, Statistics like “percentage of profitable trades” is a red herring because it doesn’t show at all how much a trader has actually gained over a period of time.
When choosing the best platform for social trading, look for a detailed portfolio breakdown that shows you which instruments the trader is investing in and how diverse their portfolio is, as well as a reliable risk indicator, such as risk assessment, as this factor can be quite difficult to assess on your own.
Social trading platform tools
Like manual trading, social trading platforms come with different sets of social trading tools that can significantly affect the outcome of your trading. Most of them have to do with managing copy trading activities after you have already selected the traders you want to copy. Although a good search function with a lot of different variables is in itself an extremely important tool.
One such tool, which surprisingly cannot be found in many social trading platforms, is the projection of the size of the trade that you can expect when allocating a certain amount of funds to a trader. This may seem like a mere detail, but it can actually have a big impact on your decision about how much money to invest in a particular merchant. For example, if you’ve been thinking about copying someone with $ 100, and the projection tells you that with this investment you can expect an average trade size of just $ 0.5, you may be tempted to increase your investment or find another retailer to copy.
Does your social trading broker equip you with the right trading tools?
Another important tool is Copy Stop-Loss. Just like a regular Stop Loss order, this tool allows you to limit how much you are willing to lose by copying any merchant. This is a safe way to protect at least part of the investment amount from market changes and bad trading. Some platforms also offer Trailing Copy Loss loss, an upgrade to the usual Stop Stop Loss, which pushes the limits of your Stop Stop Loss in relation to how much your investment has grown, thus ensuring the profit you have already made. Of course, some platforms also have Copy Take Profit orders, which is another handy tool at your disposal.
And last but not least, a crucial tool to look for is the ability to take over the copied trade, detaching from the copying relationship and turning it into a manually operated position. If you’re not happy with simply keeping an eye on your winnings from copying and is someone who intends to closely monitor copied positions, this tool allows you to tell if the copied store isn’t to your liking. Once you separate a store, you can increase your margin, edit stop orders, or simply close the store if you have no faith in its future. This gives you extra control over your portfolio, so you don’t have to sit idly by while someone else makes decisions you disagree with. With all this in mind, check out our to start choosing the best social trading platform for you!