September 22, 2021

Social Trading vs Copy Trading

Read more about Best Social Trading Apps
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Can you get big returns without doing hours of research? With copy trading and social trading, it may be possible. See how they compare in this guide.

Best Platforms for Copy Trading & Social Trading
  1. eToro - Best for Crypto
  2. Public - Best for Stocks and ETFs
  3. ZuluTrade - Best for Forex
  4. Collective2 - Best for Riskier Traders

Social Trading and Copy Trading are investing strategies that involve observing or following other traders.

These methods have a lot in common, but they aren't the same.

In this article, we'll break down the differences and similarities between Social Trading and Copy Trading. Plus, get the pros and cons of each, and learn which platforms offer these features.

What is social trading?

Social trading is a feature offered by some investing platforms that combines social media and investing. It usually allows users to:

  • Follow other traders
  • Track other traders' stats
  • Get notifications of other users' trades
  • Communicate with other traders

Different platforms approach it slightly differently, but they all have a focus on collaboration and community. Many offer chatrooms or public "walls" to leave messages and talk strategy.

While social trading can be used for stocks and crypto with popular apps like eToro, it is widely used among Forex traders in particular.

If you're new to investing and want to learn from other investors, social trading is a good way to do it.

Social Trading Pros & Cons

  • Great for those who learn by doing
  • Access to tons of helpful data
  • Focus on community
  • More time/research involved
  • May have a learning curve
  • Easier to miss out on hot trades
  • May not get the full picture of others' trades

What is copy trading?

Copy trading is a subset of social trading that allows users to mimic the trades of other investors.

While social trading lets you see other traders' investments, copy trading means that your account will make whatever trades theirs does. If they buy, you buy. If they hold, you hold. And if they sell, you sell too.

Copy trading can be a lot more hands-off than social trading. Many platforms provide a list of top traders, with personal risk scores and historical returns. You could potentially pick one or more traders to copy and leave the rest to them.

This enables you to trade beyond your expertise—which is, of course, the goal of copy trading. But you also take on the risk of whoever you're following. For that reason, it's important to monitor your account, even if you don't intend to trade yourself.

Copy Trading Pros & Cons

  • More hands-off
  • Enables trading beyond your expertise
  • Many platforms have loss-limits
  • Good for beginners
  • Potentially high-risk
  • Not as good for hands-on learners

Social vs copy trading: what's the difference?

With social trading, every decision is your own. This makes it ideal for those who want full control. There may be more of a learning curve, but you get to choose what risks you take, and for better or worse, you're responsible for your trades.

Copy trading may be ideal if you want a hands-off experience and are okay with letting other traders "do the work."

Is Copy Trading really profitable?
Copy Trading has the potential to be profitable, just as all investing does. But it comes with the same risks, too. No copy trader can guarantee future returns because no one can predict the market.

However, experienced traders with a successful track record are more likely to make wise decisions than inexperienced ones. If you're looking for a hands-off way to trade beyond your expertise, copy trading is a viable option.

Is copy trading a good strategy?

Copy Trading can be a solid strategy for new investors or for those who want a hands-off approach. Plus, most platforms incentivize popular traders to perform well, and even reward them for getting more followers.

And, of course, people are most likely to follow the traders with the best track records, meaning that popular traders will have a history of successful trading.

The one problem with copy trading is the same problem that you run into with any kind of investing: It's very hard to beat the market.

People certainly do it, at least for a period of time. But consistently making money through investing isn't easy, and carries the inherent risk of loss.

The traders with the greatest potential to make you a lot of money quickly are also the ones with the greatest potential to lose you money quickly. Because of the performance differences between risk-averse and risk-seeking traders, it is nearly impossible to judge copy trading as a strategy on the whole.

The higher-risk traders you follow, the more like gambling it becomes. If you decide to copy traders with less exciting returns but lower risk scores, then you are more likely to have a positive experience over the long term.

Social Trading and Copy Trading Platforms

Interested in trying copy trading or social trading? Review the platforms below to see which one suits your investing goals.

1. eToro - Best for Crypto

eToro
Read ReviewVisit Site

eToro

Pros:
  • Copy actions of top traders
  • No commissions (only charges a spread)
  • Virtual practice account
Cons:
  • Only supports 24 coins in US
  • Slow customer service response time

Our Review: StarStarStarStarEmpty StarEmpty Star (3.8) eToro is a cryptocurrency trading platform known for its popular CopyTrading feature. Find out if it's worth the fees and how it compares to other platforms... Read full review

Trade Popular Cryptocurrencies

Copy Trading & Social Trading

eToro is a popular social trading platform based in the UK. With over 20 million users all over the world, they're currently limited to trading cryptocurrency in the U.S.

In other jurisdictions, they also offer stocks, commodities, ETFs, Forex, and CFDs jurisdictions.

eToro is best known for their CopyTrader program. It allows users to mimic the trades of other investors, who are ranked by rate of return and given a risk score between 1 and 10.

They also offer social trading features, such as public feeds, where users can interact and viewable profiles where they can monitor important stats.

eToro also offers a range of educational content. They provide market news and analysis, guides, and a demo trading account that lets you practice trading $100,000 in virtual money for free.

Securities Traded

  • Cryptocurrency in the U.S.
  • Stocks, Commodities, Forex, ETFs, CFDs, Indices internationally

Minimum Deposit: $50 in the U.S. For most users, $200. Exceptions by country noted here.

Available on desktop, the App Store, and the Google Play Store

2. Public - Best for Stocks and ETFs

Public.com
Read ReviewVisit Site

Public.com

Pros:
  • Commission-free social trading
  • Offers fractional shares
Cons:
  • Limited investment options
  • No access to financial advisors

Our Review: StarStarStarHalf StarEmpty Star (3.5) Do you wish you knew what other investors were thinking? Public can help with that, by putting community and education first... Read full review

Get a Free Slice of Stock

Social Trading

Public is a New York-based investing social network that focuses on stocks and ETFs. Their goal is to make investing accessible by offering fractional shares of expensive stocks and promoting financial literacy.

The app lets users see what others are trading, as well as who is buying or selling what stocks. Users can also follow investments with curated themes, such as The Crypto Revolution, For the Win! (gaming and eSports), Women in Charge, and Growing Diversity.

It's free to download and use, and trading is commission-free.

Securities Traded

  • 3,000+ fractional stocks and ETFs

Public.com

Get a Free Slice of Stock

  • Invest in Stocks and ETFs, Commission-Free and No Account Minimums
  • Follow other investors, share insights, and build your financial literacy within a transparent community
  • Offer valid for U.S. residents 18+ and subject to account approval. There may be other fees associated with trading. See Public.com/disclosures/

Minimum Deposit: No minimums

Available on the App Store and the Google Play Store

3. ZuluTrade - Best for Forex

Social Trading

ZuluTrade is another popular social trading network, based in Athens, Greece. Their focus is on Forex, though they offer other instruments to trade as well.

Users can follow other traders who are ranked by performance, stability, behavior, and outlook.

One of their more useful features is that they'll present combos of traders they think you ought to follow based on your preferences.

ZuluTrade is available in the U.S. and countries all over the world.

Securities Traded

  • Forex, Cryptocurrency, Stocks, Commodities

Minimum Deposit: $200

Available on desktop, the App Store, and the Google Play Store

4. Collective2 - Best for Riskier Investors

Copy Trading

Collective2 is a U.S.-regulated company based in New York.

Users start by selecting "strategy managers," what they call copiable traders. After connecting their brokerage account to their account on Collective2, users are then able to let their chosen strategy take the wheel.

Collective2 charges monthly fees, unlike some of the other social trading apps that are free to use. Their minimum deposit is also fairly high. It varies depending on which strategy you select.

Strategy managers on Collective2 tend to favor riskier trading strategies, so it's particularly important to consider how much you invest on the platform.

Securities Traded

  • Stocks, Options, Futures, Forex

Minimum Deposit: $5,000 - $100,000

Available on desktop, the App Store, and the Google Play Store

Yes, copy trading is legal in the U.S., but it is subject to stricter regulations for U.S. residents than those in other countries. This is due to the Dodd-Frank Act of 2010, which has two primary rules that affect copy traders:

  1. You are not allowed to hedge trades by opening contrary positions in the same asset (such as a sell position in an asset you have a long position in, or the other way around) without liquidating the original position either fully or partially.

  2. First-in, first out (FIFO) is a rule that requires traders to liquidate multiple positions of the same asset in the same order they were taken, starting with the oldest first.

The existence of these rules in the U.S. but not in other jurisdictions makes it legally risky to copy traders from other countries.

If you copy a trader who is not bound by these rules, and they make trades that violate them, you may be held accountable even for trades that were executed automatically.

For this reason, the safest practice for U.S.-based traders is to only copy those who are also in the U.S.

Bottom Line

Social Trading and Copy Trading are both viable options for investors of all levels of expertise.

Whether you're hoping to get to know fellow traders, discuss the merits of your strategies, learn more about investing, or just want a hands-off approach to trading without hiring a financial advisor, there are options for you.

When choosing a social or copy trading platform, be sure to consider important factors like local availability and whether the assets you're interested in trading are supported.

Beyond that, useful things to keep an eye out for are fees, security features, the size of their user base, and the minimum deposit required to trade. No matter what your needs are, there's a good platform out there for everyone.

Jeremy Harshman is a protector of art and writing at CreditDonkey, a crypto comparison and reviews website. Write to Jeremy Harshman at jeremy.harshman@creditdonkey.com. Follow us on Twitter and Facebook for our latest posts.

Note: This website is made possible through financial relationships with some of the products and services mentioned on this site. We may receive compensation if you shop through links in our content. You do not have to use our links, but you help support CreditDonkey if you do.

eToro USA LLC; Investments are subject to market risk, including the possible loss of principal.

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Public Review

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Public.com

Get a Free Slice of Stock

  • Invest in Stocks and ETFs, Commission-Free and No Account Minimums
  • Follow other investors, share insights, and build your financial literacy within a transparent community
  • Offer valid for U.S. residents 18+ and subject to account approval. There may be other fees associated with trading. See Public.com/disclosures/

Best Social Trading Apps

August 18, 2021 - By Jeremy Harshman - Tips for Investing
Social trading apps bring community and interaction to the world of investing, but there are a lot to choose from. Find your perfect app in this guide.
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