Social Trading vs. Copy Trading

These two ways of trading represent new possibilities in trading forex or binary options assets, enabling traders to follow how others do it, and place their trades in the same way. Despite being superficially similar, social and copy trading are actually quite different. In order to understand which of these two will work better for you, you’ll need to understand the similarities and differences between them.

What are social and copy trading?

Binary trading usually requires detailed education about the financial and market movements in order to be able to place the right trade at the right moment, while social and copy trading make this process faster. Traders just need to find reliable traders and follow their steps, which allows them to trade with profit and learn trading at the same time. As most beginners see their experienced colleagues as mentors, this kind of connection builds strong and lasting relationships between traders.

Let’s take a look into the similarities and differences between social and copy trading.

Differences between social and copy trading

Copy trading

A quite strict form of social trading. It binds your account with another trader’s account, meaning that their trades reflect in your account as well – their losses are your losses and their profits are your profits. The only thing you can do when copy trading is to start or stop copying the trader, because you don’t choose to open trades. Select a peer to follow, copy their trades and settings on the trading platform – a no-brainer copy/paste system, but even the best traders can make a mistake and place a bad trade. You’re completely dependent on the trader you follow; you make profit when they’re right and lose money when they make a mistake.

Social trading

We can say to copy trading is a type or a part of social trading, meaning that social trading is a much broader term (this is where the confusion usually comes from). Not every type of social trading is like copy trading, because you don’t let others manage your trades, you’re just using the information provided and making your own decisions based on that information.

Social trading is actually more social, with platforms that provide forums and chat rooms where you can discuss trading conditions and market conditions with other traders. You choose which peer to follow – if you find their trades profitable, you can copy it, and if not, you can leave it alone. For example, the Synergy FX trading stream shows the last 100 trades, updates, and pending orders placed by other traders, creating a perfect social trading environment where you can view, follow, copy, and auto trade with others. Being able to recognize an unprofitable trade requires certain expertise, but social trading is better for responsible money management. In the end, you’re the one responsible for the result.

Which one should you choose?

If you’re new to trading, you should first read everything you can about the subject. Social trading carries a higher level of responsibility – you are the one that makes the decision whether to trade or not, which gives you more control over your portfolio. However, you can easily make a wrong move if you’re inexperienced. Despite these higher risks, this is a great way to learn how to trade if you like to have control over your finances.

Copy trading doesn’t really require you to think. Just hit the “copy trader” button, and have the automated system take care of everything, leaving you with nothing to do but wait for the trader to win. If they win, you win, and vice versa. However, this leaves you with no control over the trades, and can also make you lazy and not learn how to trade at all.

Your choice depends on the amount of control you want to have over your finances and amount of risk you’re willing to take. You may lose some money and the risks may be higher, but if you think you won’t be losing anything as a trader, better give up right now because losses are inevitable. If you’re not confident in your trading abilities, better start with copy trading. As you learn, your confidence will grow with your knowledge, allowing you to choose a different path.