Let’s be honest, day trading or swing trading as a novice can push you to quit within your very first week – by the way, that is even an accomplishment holding on the long.
One way to preserve your capital while you learn the ropes is through copy trading.
With copy trading, all you basically have to do is follow the footsteps of an experienced trader. There you go, no research needed; no timing the market.
Now, copy trading might look like just the perfect technique to implement. You still need to get it right. One way is registering on the best platform out there that makes the process seamless for you. And more, not every trading hub would be best suited to your needs.
So, are there good copy trading platforms out there? Absolutely! We will see the best of the regulated lot. And with the clutter on the Internet, which of these platforms would be appropriate for you? About that, why don’t we find out?
At the end of this review, our expert laid down their methodology of ensuring we are actually reviewing the very best of copy trading platforms out there.
Here we go.
Currency Pairs: 47
EURUSD Spread: 1.0 pips
Leverage: Up to 1:30
This copy trading platform is recognized as the best out there. eToro offers the trader an excellent opportunity to diversify by allowing duplication across 2300 instruments.
Do you fancy cryptocurrencies? CFDs? Foreign exchanges? You can copy trade every one of them, delving into different markets without having to spend weeks learning about them individually.
With eToro, you have a platform that comes with an inbuilt copy-trading system.
Besides this, this broker is one of the best for a beginner due to its user-friendly web platform. The last thing a novice needs is staring at chart patterns and making no sense of the green and red candles. Take note of that.
Also, keep in mind that trading on eToro comes with low risk. However, eToro spread fees are higher than the average.
Currency Pairs: 45
EURUSD Spread: 1.6 pips
Leverage: Up to 1:1000
Here is another user-friendly and straightforward copy trading platform. All you do is register, fund your account, scroll through a host of traders, pick one, and voila!
They have a system in place that aids you in choosing a trader based on specific statistics, such as traders with the profits on crypto, most copies, and even successful copiers.
You don’t only get to copy trades on NAGA but also connect with inexperienced and experienced traders globally.
Currency Pairs: 40
EURUSD Spread: 0.6 pips
Leverage: Up to 1:500
This copy trading platform allows you to copy traders and at the same time provide a forum to interact with other traders.
They set up an interface that makes it easy to pick an experienced trader to copy. And do you know what makes them stand out? You only pay these traders when copied trades generate profits!
With ZuluTrade, you can trade CFDs, cryptos, and forex instruments.
Currency Pairs: 42
EURUSD Spread: 0.2 pips
Leverage: Up to 1:30
Launched in 2012, Darwinex is a relatively new social trading broker. Here’s a twist to the Darwinex approach. What they do is basically copy trading, but they refer to themselves as “investment managers.”
This is not a means to look sophisticated or unique. They do offer a different approach to social trading.
Here’s how it works: you don’t necessarily copy a trader but buy a “DARWIN.” This is a financial asset that will be based on an automated strategy trading on this platform.
So, basically, this social trading platform does it differently from other platforms out there. Interesting, right?
Although unique, copy trading is very easy on this brokerage platform. However, it comes with a 20% fee. Yikes! Compared to eToro, Darwinex comes with an average risk for traders.
Currency Pairs: 32
EURUSD Spread: 0.2 pips
Leverage: Up to 1:300
RoboForex copy trading service is called CopyFX. Now, if forex trading is your strength and what you are most interested in, CopyFX would be ideal.
CopyFX allows for simplification during copy trading. Basically, all you do is choose a trader to copy, and the system does the rest for you. Pretty straightforward, right?
RoboForex is good because you can simply focus on being a copy trader using CopyFX.
Here you will have complete access to Webtrader, MT4, and MT5. CopyFX comes with a test mode – kind of like a demo account – which allows traders to test their skills with little risk attached.
Then we have the flexible, standard, risk, and proportional mode.
Notice I have been using the phrases “social trading” and “copy trading” interchangeably. Know this, while both inarguably have the same foundation, they come with peculiar differences in their build-ups.
Social Trading vs. Copy Trading: What are the differences?
Social trading is a financial market trading technique that allows traders to replicate the trades and positions of other traders.
Besides “copying” another trader, social trading enables interactions among traders.
We know fundamental and technical analysis is a crucial part of trading in any financial market. Every trader is required to know the basics of these analyses to trade towards profits.
However, some traders prefer not to go that deep. This class of traders can still trade, and one way to do this is through social trading. Open the exact trade another trader opens and exits the trade in the same fashion.
We have a network of experienced traders and social traders copying these skilled traders in this situation.
This sounds pretty much like copy trading, right? Yes, it does. But here comes their differences.
The major difference is that copy trading is essentially a part of social trading. Here are other forms of social trading:
- Signals or tips. You search for tips or signals from other traders rather than just executing their traders.
- Forums and profiles. Recall, I said social trading allows interactions among traders? Yes, this is where it falls under. Here, traders get to communicate, exchange ideas and talk about trades. While you don’t need to follow every piece of advice, forums provide an excellent environment to buffer your financial education.
- Auto-bots. This isn’t explicitly “social” trading. Bots run replicated trades.
You see, copy trading is a facet of social trading just as signals or tips.
More clinically, copy trading is more streamlined. That is, it binds your trading account to that of another trader. When this trader losses, you lose and vise versa. The process is completely automated.
Yes, you replicate a trade just as social trading, but social trading offers more. It is not entirely automated.
You can decide to copy a trader or not depending on several factors such as your view of the trade. Copying is quicker compared to social trading that requires more work with the potential of better outcomes. This says a lot.
Understanding this difference is very important for new traders, so you are fully aware of the consequences of your choices when you go with either form of trading.
So, now, copy trading looks less interesting and social trading more ideal. I mean, you get to have more options, right? Well. Yes, but copy trading is unique and immensely useful in its own way. Let me tell you why.
Why should you consider copy trading
Here are three reasons:
- It is a fantastic learning tool.
- It gives you a head start – kind of like a confidence booster.
- It is not so good a way to generate passive income but an option.
Because you pay a subscription fee to copy trades, it would seem like another way for your trading platform to earn more profits. Yes, that’s correct, and there is also more to it.
Copy trading provides a unique opportunity for new traders to learn to trade. By observing copied trades, you can learn entry and exit strategy, analyzing profitable trades. The same thing goes for losses.
Copy trading may also serve as a confidence booster. I mean, when in the very first-week trading, you cash in – something that is uncommon for first-time traders with no experience. So, you make $100 in a day, doubling your capital.
Tell me, how would it feel? Of course, you would want to keep at it. Now compare this situation to losing that same amount. Yeah, I can hear some footsteps out the door already.
Why do you need this confidence? Well, this momentum helps you hold on both in good times and bad times because, trust me, there will be bad times.
Finally, you can generate passive income by copy trading. Passive income is a type of earning that requires little or no effort to generate. Copy trading, in particular, requires little effort. Thus, the profits made through this process can serve as passive income.
But be very careful here. Employing copy trading as a passive income stream can be risky. Despite the little effort required, you need to follow the executed trades in your brokerage account. Don’t abandon it in the guise of passive income. Be wary of doing something like this.
Connect a part of your portfolio (Not more than 20% in many cases) to that of another more experienced trader. The percentage you choose to connect is streamlined with this experienced trader’s portfolio. Usually, it is a certain sum of money. This trader’s open trade is then automatically copied into your account. The same goes for their future trades.
Let’s be more practical. You have $1000 in your brokerage account. You decide to copy trades just 20% of your portfolio to a trader of your choice. This means that only $200 would be invested. Now, let’s say this experienced trader has a trading portfolio worth $2000. Your $200 becomes a percentage (20%) of this trader’s portfolio. When he makes a trade worth $1000, just $100 is deducted from your account automatically. The trader makes a profit of $500; you get 20% of that added to your $200. The trade results in a loss? The same thing applies: 20% of $500 is deducted from your $200 initially connected.
This is how-to copy trading works. Does it make a lot of sense to use it as a passive income vehicle? Of course, but you are missing out on one thing: stop losses. This protects your capital from going down the drain.
Going all passive income mode, you won’t be able to do this. And there goes your capital. Poof!
Besides all of these: an opportunity to and whatnot, what more does it have to offer when it comes to social trading?
What exactly should we be wary of besides setting up an account to generate passive income through copy trading? Yes, there’s more. And this will help you make better decisions.
Pros and cons of social trading
- Social trading may ensure gains for inexperienced traders. It offers a platform to gain collective knowledge through forums, especially the different traders you connect your portfolio to. For instance, you connect your portfolio to 3 different traders by observing their traders reflected in your account. There you go. You get insights from three experienced minds. It’s like having Warren Buffett, Charlie Munger, and Robert Kiyosaki be your financial advisors. OK, maybe that’s too much. But you get the idea.
- Since social trading platforms allow traders to connect their portfolios to multiple traders, it offers diversification. Here, I mean diversification in terms of different trading patterns and strategies. Every trader has a strategy that they follow. You get to follow different strategies due to inexperience. This offers you the benefits that come with diversifications of an investment portfolio.
- One of these benefits is risk management. If you are not going to commit your time towards financial education, at least try to learn about risk management. Trading involves huge risks. You will need to learn how to manage this risk, or else, despite your gains, you could lose all your capital in one bad trade. Yes! It takes just one trade without any risk management technique put in place.
- Let’s be honest; copy trading could prompt laziness. You can quickly tell yourself; I have a 9 to 5 job; I don’t have the time to invest in learning how to trade. Or, I make money this way, why make any effort to expand my knowledge? These “excuses” feel just right and make a lot of sense. Here is the thing though, when you get used to ignoring your account, you will eventually end up with losses.
- Beside that, how do you decide just which experience traders are successful or would be successful considering entering the market with little or no experience?
- Social trading breeds overconfidence, which can lead to greed. Now, this disregards one of the top rules of trading; letting your emotions overwhelm you and thus control your decisions.
There you have it. Should you go all out for social trading when its disadvantages more or less equal the merits?
More than that, how do you select a platform that offers you more pros than cons. This decision is all yours to make. But we can help. Here’s how.
How to choose a copy trading platform?
First of all, you have to consider the fees – spread and overnight fees. Not all free copy trading signals are great, nor are tips you have to pay hugely for. How much can you sacrifice as a subscription fee? Let this guide you.
Of course, it’s a great idea to spend more to gain more. As you must know now, social trading platforms are running a business, and most could go with a premium fee due to branding.
Another thing to consider is your risk profile. Are you an aggressive, conservative trader, or do you prefer to take a seat in the middle? Find about this, then analyze copy trading platforms’ low average loss to see which best suits your risk profile.
Now, how exactly did we come up with our list of the best social trading platforms? Let’s see.
- Regulation. Recall us mentioning the brokers being regulated? Yes, one criterion our experts looked out for was that all the social trading brokers must be regulated. We don’t want you becoming a victim of unchecked platforms.
- Assets/Pairs. Another criteria we looked out for was multiple assets. The platforms must allow trades in multiple instruments like CFDs, cryptos, forex, and more. This helps you with diversification and exposure to the financial market.
- The social trading platform must also be user-friendly, so you can confidently navigate through without getting lost.
- Our experts also checked out these broker availabilities. None of the selected copy trading platforms come with withdrawal restrictions.
- Fees are another thing our specialist looked out for. Some platforms come with hidden fees that you will only know about when you either want to deposit funds or withdraw your profits.
- Funding your account should be a seamless process also. This is why we checked this out first before choosing the platforms that were the easiest.
- Hacking is a common occurrence in the digital world. Our experts evaluated social trading platforms based on their security measures to protect your information and secure your account.
- Finally, good customer service is another feature we looked out for. We want a situation where you are confident of having your issue related to a trade solved and not having to wait for days leading to weeks! Now, that’s definitely something.
There you have it now, traders or wannabe traders! Deciding to copy trade is obviously the first step into the foray. The next step is choosing a social trading platform, not just any broker but the best you can find. Hopefully, the list we provided would help you out. What do you say? Tell us all about it in the comment section below.
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