What is Social Trading?

Social trading is the result of the integration of the core principles of a social network into the world of investing. Just like they are social networks that specialize in photography or writing the focus for social trading is “trading and investing”.

The resulting is an open space where all types of traders can find a place for them, learning from each other and symbiotically joining forces to maximize their returns.

How Does Social Trading Work?

The logic behind social trading is actually Pretty simple. As the network looks to

connect investors and new traders to experienced professional.

The resulting form this connection is that newly traders benefit as they can learn from more experienced professionals.

What Are The Top 10 Best Social Trading Sites of 2019?

 

1. ZuluTrade

Different from other firms that offer social trading services and also brokerage, ZuluTrade focuses only on the social side. The company offers “copy trading” on a vast range of brokers, permitting traders to connect through its API and its software.

ZuluTrade makes its money from charging brokers for its services. Since it does not add any other cost for the trader it is seen as a value-adding and decisive feature when opening a trading account with any broker.

ZuluTrade

  1. Minimum Initial Deposit: Based on broker
  2. Asset Coverage: FX, CFDs and Cryptocurrency
  3. Trading Platforms: MT4, Ctrader

Pros

  • Low entrance threshold and functioning
  • A massive number of available traders
  • A wide range of partner brokers

Cons

  • Underdeveloped Social Trading aspect;
  • Some time and practice required to learn how the platform works
  • Many non-professional traders

Note: Signal providers are paid 20% of the profit generated for their followers,  many professional traders are followed by up to five thousand copytraders. Certain traders in the platform have more than $10 million in assets under management at any time.

this is an incentive for good performance.

 


2. Naga Trader

If you are in Europe and you are looking for a healthy alternative, Naga Trader might be one of your best available options.

The idea behind the company was a smartphones only app dedicated to social trading. After it’s big success the company decided to venture even deeper into the market by acquiring an existing and working broker.

It is important for traders to understand that this is not a startup company but a well-rounded enterprise, as Naga Trader is backed by one of the biggest investment funds in China (Fosun Fund) and it is partially owned by one of the oldest banks in Germany (Hauck & Aufhauser bank).

Naga Trader offers an ecosystem of different services ranging from copy trading to Robo-Advisors and even wealth management.

Title

  1. Minimum Initial Deposit: $500
  2. Asset Coverage: Stocks, CFDs, ETFs, FX, Cryptocurrency, Indices, Commodities
  3. Trading Platforms: Proprietary web and mobile apps fully dedicated to social trading.

Pros

  • Well designed App and Web platforms
  • User-friendly and easy to use interface
  • A wide range of trading instruments
  • Unique Social Trading Service

Cons

  • Many options and features can be a bit confusing
  • Fees and commissions can be high
  • The web trading platform might be too simple
  • No MT4-MT

Note: Something that more brokers should pay attention to is to separate live investors with demo traders. Naga Trade hit it perfectly with this point, offering two visions of their own platform, this way you won’t find yourself copy trading demo traders with nothing to lose.

3. Tradeo

Tradeo is an overall well-rounded option for the social trading sector. The company has a vast offering of asset classes and it counts with its own fanbase of professional traders.

There are extensive opportunities for investors to engage socially in the platform and also to copy trade as well.

A key characteristic of the company is its dual platform offering. Their proprietary software is great for new traders, but for anyone looking for a more sophisticated platform, Meta Trader 4 and 5 are available for trading.

Besides Copy trading, tradeo offers a portfolio investment mode under which traders can follow portfolios or develop their own.

Title

  1. Minimum Initial Deposit: $100
  2. Asset Coverage: Stocks, CFDs, FX, Cryptocurrency, Indices, Commodities
  3. Trading Platforms: MT4 and also a Proprietary software

Pros

  • Compatibility with MT4 provides excellent access to the most advanced tools in the marketplace.
  • A highly comprehensive training academy with a range of resources dedicated to helping traders both new and experienced
  • Advanced Social Trading features and capabilities

Cons

  • Relatively high withdrawal fees to credit cards and alternative payment methods
  • Only one account type to choose from may discourage advanced level users
  • Trader evaluation tools fairly basic

 


4. Darwinex

Darwinex is a fairly new broker, the company started its operations in May of 2014 and has been regulated by the FCA since.

The company offers social trading capabilities very different from the rest of the names mentioned on this list. The model offered by Darwinex connect investors with professional traders that will use the companies proprietary model for risk management in its operations.

As a very common practice, traders receive a commission based on the performance generated but in the case of Darwinex, it is also taken into consideration the risk levels taken. If a trader fails to comply with the risk policies of the company, it will receive 3 warnings before being blocked in the platform.

This ensures that risk management and performance are the top priorities of any trader offering his services.

 

Title

  1. Minimum Initial Deposit: $500
  2. Asset Coverage: Stocks, CFDs, ETFs, FX, Cryptocurrency, Indices, Commodities, Funds
  3. Trading Platforms: Proprietary web and mobile apps fully dedicated to social trading.

Pros

  • Traders only compensated for success
  • Risk automatically limited
  • FSCS (UK) capital protection (£500K)

Cons

  • A 20% performance fee is not low but at least you don’t pay hidden fees on spreads
  • Not possible to trade by yourself using the darwinex broker
  • Still relatively new platform – earnings potential still unconfirmed

Note: The company usually reinvest its own money as part of a trusted campaign to promote its top traders. It is fairly common to see traders with a couple of million dollars in asset under management at any time.

 


5. Ayondo

Ayondo offers a Swiss touch to social trading, allowing investors to diversify their portfolios with up to five different traders at the time. The company offers several different models to follow in order to achieve the desired risk levels for every type of portfolio. This allows both conservatives and aggressive investors to balance their expected levels of returns and their risk appetite accordingly.

Even though their service is great, they still have a lot of things to do in order to take their platform to their next level. Since there are still several modules that are simply too complicated for new investors.

Title

  1. Minimum Initial Deposit: $100
  2. Asset Coverage: Stocks, CFDs, ETFs, FX, Cryptocurrency, Indices, Commodities, Funds
  3. Trading Platforms: Proprietary web and mobile apps

Pros

  • Good traders research tool
  • Detailed traders performance data
  • Well regulated in Europe
  • Low-risk providers are rewarded

Cons

  • A relatively low number of Top Traders
  • Demo account only last 21 days
  • Poorly customizable Money Management
  • Only overall Capital Protection,


6. Collective 2

If you are a US Citizen or you currently live in the US, Collective2 is a great option for you. The company offers its very own interpretation of SocialTrading where instead of following a trader and copying their trades, you can choose to follow the strategy of that trader. It sounds more complicated than it really is.

Professional traders offer backtested strategies that can generate income via active trading, and this is what is followed.

Instead of charging a fee based on the performance of the strategy, Collective 2 charges a fixed semestral fee per strategy and an additional charge for any other strategy on a monthly basis.

Due to its nature, this specific business model is perfect for more sophisticated investors looking to allocate a bigger capital into social trading.

Title

  1. Minimum Initial Deposit: Based on Broker (High-end brokers like Trade Station have a minimum initial deposit of $5,000)
  2. Asset Coverage: All asset classes traded in major exchanges
  3. Trading Platforms: Offer compatibility with some of the best platforms available in the market (MetaTrader, Ninja Trader, TradeStation)

Pros

  • Automated trade copying
  • US friendly
  • Multi-broker AutoTrade technology
  • Very profound statistical data on the strategies

Cons

  • A complex system of commissions
  • Poor risk/money management features
  • No own broker solution
  • Stocks trading is available only for US customers

Note: Different types of strategies will require a specific minimum capital necessary to profitably work.


7. Myfxbook Autotrade

If you have been around the world of trading for a while, you might come across with myfxbook. A web page that specializes in learning content as well as log books and audited performance reviews of any trading account.

As of January of 2019, the company is offering its services to more than 300 brokers worldwide, making it one of the most accessible applications in the market.

Title

  1. Minimum Initial Deposit: $1000
  2. Asset Coverage: According to broker
  3. Trading Platforms: Meta Trader4 – 5, C-trader

Pros

  • Every system and trader you copy risks their own money
  • Decent choice of partner brokers
  • All systems verified and monitored to meet requirements
  • Wide choice of stats and graphs

Cons

  • Not all data is shared by every system you can copy
  • Partner broker costs/commissions per trade not transparent
  • Use of “hypothetical” results & stats can give wrong expectations
  • Slippage means your results will be slightly worse than the systems you copy

Note: Slippage can turn into a very nasty situation since you might find yourself using two different brokers and probably different internet providers in different countries. This means that information will take more time to reach the exchanges and the price might have already moved from where the signal was sent.


8. Trade360

Trade360 is a different offering than the rest of this article. The company developed its own version of social trading which they call “CrowTrading”. This model is managed by an algorithm that takes detect trading patterns from the professional traders available in the platform.

The basic principle of their service is that instead of following or copying the trades of one specific investor, you could use the algorithm to copy the overall trend in the market. In synthesis 360 offers a macro view of the financial markets.

The model is more

Title

  1. Minimum Initial Deposit: $250
  2. Asset Coverage: Stocks, CFDs, ETFs, FX, Cryptocurrency, Indices, Commodities
  3. Trading Platforms: ParagonEX

Pros

  • Unique trading service offered: Crowd trading
  • Wide range of tradable assets

Cons

  • No account management services
  • It’s a very new model and it has not been tried in extreme market conditions yet

 

 


9. Tradency Mirror Trader

Tradency offers a copy trading model where instead of following traders you follow algorithms and their performance. It might sound simple but the type of strategies offered with an automatic trading model is definitely top notch in their class. This is a valuable company to be considered by anyone looking to reengineer their portfolio since diversification is available between bots.

Some of the most complex strategies offered by Tradency uses AI on their decision making, to a point where there is little to nonmanual and human input on the trading.

Title

  1. Minimum Initial Deposit: Based on Broker
  2. Asset Coverage: Stocks, CFDs, ETFs, FX, Cryptocurrency, Indices, Commodities
  3. Trading Platforms: Mirror Trader

Pros

  • Risk can be managed separately for each strategy copied
  • Full control (open trades can be closed from Mirror Trader interface at any time)
  • Fully functioning free demo account available

Cons

  • No social interaction possibilities with strategy providers or other traders
  • Strategy providers do not need to trade their own signal from a live account

 

Bonus

 

Tradingview

Tradingview does not offer signals or copy trading, but they have one of the best platforms for technical analysis available for retail investors. Considering that there is a free version and that the highest paying account is under $40 a month, TradingView provides an unmatchable bang for your buck.

One of the key elements that make the platform so great, is how intuitively it is and also the tons of content that are posted on a daily basis. Many experienced stock traders charge their knowledge through the platform. It is not difficult to find yourself reading an article of a HedgeFund manager explaining certain ideas and views of the market.

Tradingview might not have its own broker but their execution platform is available for many known brokerage houses.

If you are interested in learning more about financial markets and investing, Trading View could represent a great asset for your arsenal.

Title

  1. Minimum Initial Deposit: $200
  2. Asset Coverage: Stocks, CFDs, ETFs, FX, Cryptocurrency, Indices, Commodities, Funds
  3. Trading Platforms: Proprietary web and mobile apps fully dedicated to social trading.

Pros

  • Access to real-time data
  • Access to online charts on your browser
  • A wide range of tools, indicators, and chart features
  • Learn from trading ideas of others

Cons

  • No Level-2 Data available on any asset class

Note:

Is it Easy to Make Money from Social Trading?

Yes and no, let me explain. Social tradings make it easy for any new investor to allocate cash following the strategy of a specific trader, but there are no safe bets in the financial markets. It is important for investors to take their time to review the previous performance of any trader before following them. Most of the platforms offer top lists with the best traders available in certain categories:

  • Best risk-return ratio
  • Overall more profitable
  • More conservative
  • More aggressive

A secret to many more experienced traders is that they can also make money from Social Trading as brokers and platforms offer them a fee based on their performance, up to 20% of the profits generated for all the traders following their strategies. Since the traders will only get paid if they provide an excess of returns, this works a self-balance for them to also control their risk management.

What are some of the benefits of Social Trading?

1. Makes trading accessible for Beginners: There are many resources available for beginners to learn from professional traders.

2. Copy Trading: The idea behind copy trading is to enable new traders or simply any investor to follow and automatically copy all the trades executed by a selected professional trader. Typically the selection is based on an existing track record of profitability and experience.

3. Information Flow: Social trading opens space for investors of all calibers to share information in the same place. It is very common to see more experienced traders provide thoughts on their investments and the reasoning behind them, making this an invaluable resource for beginners interested to boost their learning curve.

4. Transparency: It is not uncommon to hear stories about new investors trusting paying signal services that ultimately end up in disaster. Many sites add extra steps to how previous performance is reported and validated, to a level where more strict services only allow performance records that were obtained under their own platform, ensuring that every report offer to the public has been reviewed and authenticated.

5. Monetization: Investors with a track record and proven experience in the markets can gain access to monetization programs, effectively fomenting traders to grow and stay within the platform. There are many different models but one of the most profitable ones allow experienced traders t0 charge a management fee and also a performance % to all investors copying their traders (just like an asset manager would).

Conclusion

Social trading offers both active and passive benefits for all types of traders. As the world gets even more connected every day, it is important to remain up to it.

For many social trading represents a heavy disruption by fintech to the overall financial markets as it essentially makes obsolete for retail investors many paying services that they used to receive from other professionals like asset management and investment advisory at its best.

With many of this networks surpassing millions on active users and hundreds of millions of dollars in assets under management, it is easy to see that this business model is here to stay and that it will continue growing more every day.

If you are an experienced investor, this could an opportunity for you to raise capital to maximize the returns of your trading and essentially work as an asset manager.

Disregarding what is your position in the markets, there is a social trading network for you and I truly believe that anyone can benefit from being

About the Author:

Avatar

Vidal Arias

Vidal is an experienced Strategist and Portfolio Manager with a keen interest and passion for the financial markets. During his career, he has developed excellent market timing skills, focusing mainly on the macro analysis of the US Equity Market and the overall US Financial Market. He started his career as a financial analyst for a major American bank and continued his way into the trading desk as a Sr. Trader and later as a Portfolio Manager for an Offshore Hedgefund in Europe. Linkedin: vidalarias Email: vidal@dojiventure.com

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