The disruptive phenomenon of cryptocurrency social trading is changing how regular investors think about making consistent and lucrative transactions. By studying the tactics of seasoned traders and copying them, anyone may get involved in the trading craze.

Ignore the disclaimers that say more than 70% of traders lose money when they trade. Instead, the combination of cryptocurrency trading and social trading gives investors the chance to avoid the psychological fear that comes with the markets and become consistently profitable.

What Is Crypto Social Trading?

A form of investment known as “crypto social trading” enables investors to mimic the trading methods of more seasoned cryptocurrency traders.

It differs significantly from typical cryptocurrency trading. In the past, you would sign up for an account with a cryptocurrency exchange to trade different cryptocurrencies. You would use technical indications and financial news to sell the cryptocurrency market to make profitable deals.

Even though this is the most popular way to trade financial instruments, it is dangerous. Because they lack the mentality required to secure regular returns, most traders lose money over time. Investing in a hedge fund is one strategy to reduce risk if you have a lot of money at your disposal. However, doing so typically does not result in most traders’ reliable monthly returns.

The use of social trading is one solution to these issues.

Because cryptocurrency trading platforms allow users to deposit as little as $1, you don’t need to be a millionaire to take part. You can enjoy the high gains associated with intraday and day trading by copying the trades of seasoned traders in your account through social trading. In general, everyone can engage – with little or no restrictions in a transparent atmosphere.

So who exactly are these experienced traders?

Expert traders are people who, in general, have a great deal of confidence in their capacity to trade cryptocurrencies and other financial instruments. A person who wants to become an expert must demonstrate consistent and successful trading. By participating in the unique program made available by the individual social trading platforms, anyone can develop their trading skills to an expert level.

After examining their trade history, risk-reward ratio, ROI indicator, and other factors, you can follow numerous experienced traders at once. Depending on the company’s business strategy, you can either trade cryptocurrencies directly on the platform, or you might need to use an automated API to connect your current crypto account.

According to the trading community, the cryptocurrency trader and the crypto social trading platform benefit from this arrangement. It enables cryptocurrency traders to automatically execute transactions in their trading accounts from multiple seasoned traders. On the other side, by charging a service fee to each user, the social trading platform can boost its earnings.

Here is a summary of how the various cryptocurrency social trading platforms on the market service their users so you can better comprehend them.

Volume-Based

The replication of the trades of seasoned traders is free of charge on social trading platforms like eToro and Zulutrade. Instead, if a business is started in your account, these platforms are often paid from the bid/ask spread. In other words, it indicates no cost associated with following a professional trader.

Fee-Based

Some platforms levy a minor fee to support their business strategy. For instance, NAGA levies a $0.99 per trade fee and a 5% commission on lucrative trades that exceed $10. NAGA has a stellar reputation in the market, but it might not be ideal for investors wishing to trade relatively tiny amounts. You’ll probably lose more in this situation than you gain.

Subscription-Based

Examples of well-known platforms that rely on subscriptions are coinmatics and Collective2. You must join one of their plans as a subscriber to get the necessary features as an investor. In exchange, there are no fees associated with copying deals.

There are various subscription model types. For instance, Coinmatics allows users to copy multiple tactics from experts for anywhere between $0 and $25. Comparatively, Collective 2 gives professionals the freedom to choose their prices for their tactics.

Hybrid

A hybrid business strategy is exemplified by the social trading site Tradelize, which is relatively young. Their free plan includes all the essential services, unlike other subscription-based programs. Professional and institutional clients, however, must pay an additional fee to use sophisticated services.

These aren’t the only service models that cryptocurrency social trading platforms employ. Market systems come in different shapes and sizes, including profit-sharing and performance-based models. Regardless of the costs, it’s critical to realize that service costs are one component of the overall picture. However, the secret to successful social trading is in the caliber of the expert traders on the network.

Benefits and Drawbacks of Crypto Social Trading

The nature of financial trade has changed as a result of social trading. The modern trading environment is affected by seasoned traders, automated systems, and cryptocurrencies. Hedge fund managers used to rule this market. If you’re still unsure, consider the benefits and pitfalls of social trading below. You can use it to determine whether social trading is worth the hype.

Pros

The smallest learning curve

No matter how much you know about the financial markets, you may still produce positive ROI through crypto-social trading. Additionally, automation gives you a psychological lift to keep making money without worrying about the current mood or market circumstances.

Management of time

Modern crypto social trading platforms provide cutting-edge control panels that let you build a risk profile automatically to capitalize on current movements. No need to manage trades when seated in front of the trading terminal. By allowing others to trade for you, cryptocurrency social trading saves time and energy.

Training in Trading

Learning new trading methods and strategies is made easy with the help of cryptocurrency social trading. If you have experience trading financial instruments, you can learn a lot about a trader’s techniques and risk management by looking at their transaction history.

Superior Transparency

Social trading in cryptocurrencies is open. Reputable crypto social trading platforms provide in-depth information on each trade, unlike hedge funds, signal provider services, and copy trading. Because of this, it is tough to falsify performance data.

Diversification of holdings

You can diversify your investments with cryptocurrency social trading. You can choose from various signal providers and change the parameters to suit your preferred level of risk appetite. Most platforms simultaneously allow you to invest in stocks, foreign exchange, and other financial products.

Cons

Fewer controls

Because you mostly rely on the success of other traders, crypto-social trading does not provide you with complete control over your trading choices. If things go wrong, you risk losing a lot of money if you haven’t set a risk profile for your professional traders.

Performance trickery

Performance charts for cryptocurrency social trading can be customized for a professional trader. For instance, a false sense of security can frequently result from the lack of information on drawdowns. A drawdown is a decrease in the capital on hand when the trading account is below its peak before it rebounds. As a result, it’s essential to examine drawdowns rather than just glancing at the performance chart.

Greater budget

The cost of social trading in cryptocurrencies may be higher. The initial deposit required to open an account may be far more significant than the amount you want to invest, depending on the crypto clone trading platform.

More Difficult

Social trading with cryptocurrencies frequently involves a little learning curve. It may take some time to get used to the atmosphere because each cryptocurrency social trading platform has unique guidelines, cost structures, and control panels. Try to execute a demo trade in this situation before using real money entirely.

Comparing cryptocurrency copy trading and social trading

Copy trading and “social trading” are frequently used interchangeably. It won’t be an exaggeration to say that the internet is replete with false definitions and concepts addressing the differences between the two, given that many of these concepts are new.

Most people mistakenly believe that social trading is the practice of adopting the trading philosophy of the social trading community, whereas copy trading mimics other traders. However, as they apply to contemporary crypto-social trading platforms, these ideas hardly capture the reality on the ground. Social traders with experience are aware that searching the internet only makes things more confusing.

Why Do Copy Trades Happen?

Copy trading is a subset of the much more widespread social trading phenomenon. When users could receive trade signals on their mobile devices in the early days of online trading, the idea of copy trading emerged. The signal provider would notify customers who had signed up for their service.

You may quickly imitate a professional trader’s trading signal using the platform. As technology advanced, signal providers began offering their services via copy trading. Such signal providers were able to leverage established copy trading platforms to provide signals that thousands of people could automatically replicate without the need for SMS notifications. The first platform to provide copy trading services was Mirror Trader, founded in 2005.

Making the switch to social trading

A genuinely social trading platform was introduced by eToro just a few years later, improving the idea of copy trading. Offering a control panel where users could set risk parameters, giving consumers greater control over their trades instead of just allowing them to replicate other traders.

Using the technology, anyone may instruct the system to halt the trade if it violates their risk tolerance, much like setting stop-loss and take-profit, regardless of the approach.

The introduction of various financial instruments for everyone to trade is another crucial idea strongly related to the definition of social trading. Modern social trading bitcoin systems allow consumers to sell assets much as they would with a broker instead of copying professionals.

Essentially, traders can interact with the social trading community of a particular platform and take positions apart from those created in their portfolio by trading specialists. They can also modify the share of a particular asset in their portfolio or follow the portfolios of their other traders to save time and make smarter judgments.

Social trading is a phenomenon that is truly “social” due to all of these characteristics, allowing everyone to gain from the collective wisdom of the community. In contrast to pure copy trading, when only the expert trader makes decisions, the concept is different.

Also, read – What Is The Future Of Crypto Investing Post Crypto Winter?

The conclusion

Social trading is already being discussed as a potential replacement for traditional investment. The model is a logical replacement for conventional investing techniques because of its control and flexibility. Try a demo account if you’re still on the fence to see what the countless opportunities that crypto social trading platforms can provide are like.