Crypto Social Trading: what is it and how does it work?
Have you tried to trade cryptocurrencies without success? Do not worry; that sounds like most people.
Or maybe you can trade but lack the time to do the necessary analysis; then you should consider participating in social trading. The service allows you to manually or automatically follow professionals with a history of commercial success and obtain the same results as them.
In this article, we will describe what social trading is and how it works in crypto trading.
What is Social Trading?
Social trading is an innovative practice that allows potential or novice traders to interact and copy the trades of more experienced crypto traders. Trade copying helps subscribers enjoy the high returns associated with day trading with little to no trading effort on their part.
Social trading allows crypto traders to interact with other traders, combining social interaction with trading. The practice ranges from traders discussing trades and strategies on platforms or social forums to copying other traders’ trades. The term “social trading” is also used to cover copy trading and mirror trading activities since traders copy and replicate what other traders are doing.
How Crypto Social Trading Works
Social trading platforms differ in the way they perform their services. However, the underlying principle is the same: investors copy the trades of more experienced traders. The copied traders are usually called the leaders, while those who copy traders are the followers.
Seeing that the scope of social trading is a bit broad, let’s take a closer look at how it works.
Copy trading allows traders to copy the trades of more experienced ones, who in turn earn a predetermined amount or percentage as profit.
In copy trading, you decide how much you want to invest, although platforms usually have a minimum investment amount. You then copy everything the leaders do automatically in real time. This style of social trading works for those with little to no trading knowledge because they don’t need to have entry while still getting the same returns as the traders they follow.
Signal providers give signals and trading advice to other traders. For example, they sometimes use social media to provide trading signals to their followers. A signaling service can also take the form of an automation that reveals market or trader sentiment and uses certain technical indicators to provide traders with real-time market information as trading signals.
There is usually little to no interaction between traders on these platforms. Followers must also have a certain level of knowledge to understand and execute the signals provided.
These are platforms that allow traders to interact with each other before initiating trades. They discuss trading strategies and styles, where to enter and exit trades, and more. Many trading platforms have forums where customers interact to share what they are doing and learn from each other. This style of social trading helps novice traders learn from more experienced ones. It also requires the follower to have a basic knowledge of trading.
6 benefits of crypto social trading
Below are some advantages of crypto social trading.
1. A convenient way for beginners to get started
It takes time for beginners to find their way in the crypto market and more time to form a reliable crypto trading strategy. Copy trading offers a more convenient way to get started in the crypto market since you don’t need to know how the market works to make money.
2. Save time
Social trading saves time and effort because you can (potentially!) earn money without having to trade yourself. You can easily combine it with your daily activities or a full-time job. Some experienced traders also engage in social trading to earn passive income when engaging in other activities.
3. Helps traders interact and learn
Social trading makes it easier to associate and interact with other crypto traders, as in the case of trading forums. Traders can discuss their thoughts on trades and then choose the one they think is the best. They can also learn from the most successful traders by watching how they trade and perform their analysis.
4. 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 outcome you are most comfortable with. This way you can, to some extent, predict the type of outcome 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 he will have good results in the future.
5. Gives some control
Many social trading systems allow you to have some form of control over your account. You can choose to opt out of transactions that you are unsure of. You can also close losing trades to limit your losses. If you lose faith in one trader, there is always the possibility of leaving it for another.
6. A potential source of income for experienced traders
Experienced traders can earn more than they normally would by providing copy trading services or being signal providers. They could make money by entering into an incentive agreement with their customers or by offering a subscription plan that their customers would subscribe to constantly.
3 Disadvantages of Crypto Social Trading
Below are some disadvantages of being involved in crypto social trading.
1. Potential loss of deposit
We cannot deny that professional traders can make mistakes or have losing streaks, resulting in the loss of much or even all of their capital.
Inexperienced traders who have struggled to achieve consistently good results from trading could start a signal-providing service to make money. There is no doubt that traders who follow such signals cannot be successful in the long term.
2. It could be misleading
Social trading can 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.
3. Inability to master trading
Even though you can learn to trade by studying and following successful traders, you might find it difficult to do your trade analysis on your own due to your over-reliance on professionals. It won’t be a problem if you’re okay with copying other people’s trades, as long as they end in a profit. However, if your goal is to master how to trade yourself, you need to take your time to learn about the market, develop your strategy, and continually improve it.
4 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 look at four platforms where you can perform crypto social trading activities.
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 a single trader.
Zignally started in 2018 and launched its copy trading model sharing mode later. The profit-sharing model incorporates professional traders, who use their trading capital to generate revenue for their subscribers. The platform provides investors with strategies, information and tools to choose the best digital asset managers.
Shrimpy started in 2018 as a crypto wallet management platform where you can easily link all your exchanges and wallets to manage your crypto assets. Soon after, he introduced his social trading service to connect a community of crypto traders.
All you need to do to take advantage of social trading services is connect your exchange(s), check the leaderboard to find a leader that suits you, and start following. Moreover, the service allows the integration of more than 30 exchanges and wallets.
4. Do as I do
CopyMe also allows investors to copy traders automatically and in real time. You can follow one or more experts on the platform without sending 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 trying?
If you haven’t been able to achieve consistent trading success, don’t have time to trade, or want to diversify your portfolio, you should consider engaging in crypto social trading. Over time, institutions and individuals with large funds have hired professionals to trade and manage their funds. Now, this opportunity is open to everyone thanks to social trading.
Make sure you are patient enough to choose the right trader and the right strategy. All in all, remember that positive results are not always guaranteed in trading.
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