As a beginner trader, it can be incredibly hard to make successful trades; reading and understanding the charts is difficult. Even harder, it can take many hours and sometimes days to conclude a trade with the potential of making profits.
The desire to help other traders (especially beginners) brought about the creation of social trading. However, copy trading is the most popular form of social trading, as beginners can simply copy the trades of those more successful than they are. Things are changing quickly with copy trading: some new trends and predictions will shape development of copy trading .
This article will serve as a guide to explain the meaning of copy trading, how it works, and trends that will shape its future.
What is Copy Trading?
Copy trading is simply a form of social trading where traders (mostly beginners) get to copy to trades of those who have more successful trades.
The two major pieces of information that traders copy when engaging in copy trading are a trade’s opening and closing points. In some cases, the trader may also copy the stop-loss information of the trade.
In many instances, copy trading is manually conducted by those interested in getting trading information from others. It should be noted that there’s no guarantee you will have a successful trade even if you copy trades from the most successful trader.
How Does Copy Trading Work?
Copy trading relies on communication networks and social platforms to share trading information.
This is how copy trading works. When a trader who is more successful than many other traders opens a position, they share their opening position with other traders who are interested in learning how they trade. When a successful trader closes their position, they share it with those copying their trade. Together with the opening and closing positions, these traders also share the name of the asset traded and its stop-loss positions.
Those who copy the trades of others subscribe to their service by paying a fee. While using copy trading, ensure you use a reliable and reputable social trading platform to avoid being defrauded of your money.
Trends and Predictions for Social Trading Platforms
Below are some trends and predictions that will shape the future of social trading platforms
● Crowdsourcing
Crowdsourced trades are shaping the future of social trading and what it is known for. A crowdsourced trade is a type of social trading where three or more traders combine their funds to invest in a particular asset.
With crowdsourcing, traders pool their money together and have access to a larger amount to make a significant investment. Because of how big their capital is, it enables traders to earn a large proportion of profit after a successful investment. Crowdsourcing trades also reduce the risks as the whole process of investing is shared among a larger number of traders, and they bring all their knowledge together.
While crowdsourcing brings more profits and helps share risks, it also has associated challenges. The number one challenge you might face if you want to engage in crowdsourcing is that you must trust the traders that form the group. The next thing is that the traders must have sufficient knowledge and experience to pull off a successful trade.
Apart from bringing in funds and experience, setting the rules and regulations guiding the group of traders and their investments might be challenging too.
The idea of crowdsourcing has become increasingly popular on social media platforms. Especially on platforms like Twitter and Facebook, people have learned to build a community of traders who pool their funds to make successful trades. While this might seem to be the next trend in social trading, one needs to be careful of the traders that join in pooling capital and their experience/reputation.
● Trading Networks
Trading Networks are now getting widely accepted because it makes it easy for traders with little or no knowledge about trading to grow. At social trading networks, you are a beginner in trading and have all the information and guidance you need to make successful trades. Assuming it is a crypto trade, you are given all the vital information, such as entry and exit points and the stop loss parameters.
Trading networks are built to integrate a chat room where traders can share their ideas before making a trade. Here, the group of traders making the trade will debate on many things to ensure the trade is successful. In this chat room, traders can share information, such as charts of an asset, before investing in it.
Trading networks are a growing trend among beginner traders, as it helps them make trades even though they are newbies. It allows them to see what the experts are doing on the platform and what they can implement to grow their skills. Since there are chat rooms available, they are also able to ask questions and talk to experts before trading. This allows you as a beginner to grow rapidly than learning and trading alone.
● Mirror Trading
Mirror trading is a form of trade similar to copy trading, but it still has differences that separate it from copy trading. However, this method of social trading is shaping how traders interact with each other to make a successful trade.
Mirror trading is the automated or advanced form of copy trading, as both operate similarly. The major difference is that mirror trading is automated and involves trading robots, while copy trading is mainly manual. Mirror trading involves setting what is called a “mirror account” that replicates an expert trader’s trades with a bot’s help.
In most cases, you don’t have to choose the expert trader; the trading robot automatically copies the trader with the most successful trades.
Conclusion
Copy trading is a branch of social trading that allows those with lesser trading knowledge to copy trades from those who are more successful. While copy trading is still popular, new trends of social trading have been emerging in recent years, and they will shape the future of social trading platforms.
Some new trends shaping the future of social trading are mirror trading, crowdsourcing, and trading networks.
