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Is social trading the same as copy trading?

Is social trading the same as copy trading?
Asked by
Jane Goodwin categorie-icon time-icon6 months ago
1 Answer Answer Question

Justin Freeman
Answered time-icon6 months ago

‘Copy trading’ is a form of ‘social trading’. The term ‘social trading’ does, however, go on to encompass a range of other activities.

The two terms are used interchangeably, and the trading community is more interested in making money than pulling anyone up on their grammar. Knowing the difference is not as important as understanding the opportunity they both provide.

The copy trading platforms can be somewhat overwhelming as there is an extensive range of traders looking to be copied. If you’re new to the concept then a reputable but smaller broker such as FXTM might be a good place to start. FXTM have a comprehensive range of traders on their platform and cover a wide range of strategies but you won’t be faced by thousands of accounts that you need to filter through.

The eToro broker platform offers an example that helps clarify the difference between the two terms. On there, it’s possible to sign up and mirror a trader, one of the services being CopyTrader. Trades by their trader will be automatically mirrored in your account. If they trade at 10am on Tuesday, so will you: if they trade in double the size, so will you. This is copy trading and somewhat confusingly will by some also be referred to as social trading.

If you are using the eToro site to share and access information on the markets you are taking part in social trading (but not copy trading). They have a Social Trading Newsfeed that allows account holders to receive news from other traders and investors. There might be thoughts on trading a particular strategy or on the markets in general. The key point being it’s a place and a way of sharing ideas and for users to take that information and use it to their own benefit.

Of course one of the major differences is that generally speaking social trading is free and copy trading involves a fee being paid. In line with money changing hands copy trading will require documentation and formal agreements to be put in place.

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