Social trading platforms have become more popular as online trading has increased. They offer strong incentives to both the wannabe trader and the experienced trader alike. The former hopes to learn more about markets and achieve some success by copying the trades of the experienced trader. The latter can earn additional income by sharing trades and ideas.
This guide suggests the best social trading platforms in 2021, complete with pros and cons and the considerations that contribute to choosing the best platform for you.
Our List of the Best Social Trading Platforms
Here is our list of the best social trading platforms in 2021:
What Is a Social Trading Platform?
As the name suggests, this is a social platform built specifically for financial traders. It brings together people with the same interests (i.e., trading financial markets) and connects them so that both parties benefit.
Social trading platforms are used to share ideas and trades, and even to allow automatic copy-trading. The aim is to share the success of experienced traders with beginners and newcomers. All parties have something to gain: the social trading platform provider, the broker(s), experienced traders, and beginners.
How Does a Social Trading Platform Work?
A social trading platform is an intermediary that brings two kinds of actors together: brokers and traders. One of the ways that a social trading platform makes money is by recommending brokers to traders.
Traders get together to share ideas, and beginner traders can copy the trades of experienced traders. Any commissions from those trades are shared between the social trading platform and the experienced traders. A social trading platform should be more successful if it has a stricter process for selecting successful master traders.
Key Features to Look in a Social Trading Platform
One of the most important things to consider is why you want to use a social trading platform at all. Is it to copy the trades of an experienced trader or just two interact with experienced traders?
The characteristics you should then look out for are how popular the platform is among retail traders, how many successful trading strategies it gives access to (at what cost), and how well those trading strategies have performed in the past.
Pros & Cons of Using a Social Trading Platform
How to Choose the Best Social Trading Platform for Me?
Choosing the most appropriate social trading platform for you depends on what the final goal is. Some traders only want to be part of a community of traders: to share ideas and learn without actually trading. Others want to copy trading strategies. Regardless of the reason, our list of the best social trading platforms should help you compare and make the right choice.
How to Safely Use a Broker to Make Money Online Trading?“ A brokerage house is a financial intermediary that matches buyers and sellers of assets so that trades can be executed promptly. Although the broker is responsible for ensuring that the trades go through as expected, it isn’t responsible for your trading performance. It’s up to you to decide what assets to buy and sell, and when, and to put appropriate risk management provisions in place; for example, stop orders to protect unprofitable positions. The situation is somewhat different when copy-trading via a social trading platform because you’re relying on the trading decisions made by someone else (the experienced trader). Although some platforms let you dial your level of risk tolerance up or down, you should still consider how to diversify away some of your risk. Put simply, don’t entrust all your money to the performance of a single experienced trader, however much you trust the platform’s vetting procedure. ”- Mircea Vasiu
Using a social trading platform can make the life of a trader much easier. However, it also presents some challenges: difficulty in choosing the right strategy to copy, and accounting for the fact that trading conditions differ between brokers. To simplify your search, we’ve listed a selection of the best social trading platforms.
Frequently Asked Questions
No, they are not. Forex brokers often choose to avoid regulation due to the high initial and ongoing costs that come with it, if they’re not financially strong enough to support such costs. Some brokers, therefore, choose to register offshore to avoid the financial burden. As a trader, it’s in your interests to choose a regulated broker for the added protection this provides.
It depends on the market being traded. Many forex traders favor the MetaTrader 4 and 5 software. These two platforms have been offered by most brokers for many years and there is a lot of expertise behind them. The online community of MT4 and MT5 traders might also be able to help you with any issues you encounter. Most brokers also allow you to trade via their own mobile trading apps and online interfaces, some of which are very good (and some not so good).
Yes. The forex market is just one of the many markets that they offer. Commodities, indices, bonds, and even cryptocurrencies might be made available by the broker you choose. The advantage is that multiple markets allow for better diversification as a mechanism for managing your money and risk.
Fairly easy. Your account can typically be set up within minutes of filling out the online application form, and fully activated within a few hours or sometimes days. Any delays are usually to do with you providing any required identification documentation.
Diversification is a way to manage your risk by dividing your available funds between many different assets — different currency pairs, and even commodities and stocks — to reduce the risk associated with allocating all your funds to a single trade that could wipe out your account if it goes against you.
A stop order is a pending order that you attach to an existing trade. It instructs the broker to close your position if the price starts to go against you; the aim being to exit at a small loss before it becomes a big loss.