What is social trading and how does it work?

What is social trading and how does it work?

Social trading can be exactly what you are looking for, as it offers you the opportunity to make profits without having to rely on your skills or understanding of the market.

Getting started in Forex all on your own can be quite difficult. Learning all the different terms and acronyms, getting used to the way trading platforms work, and doing market analyses on your own can be very time-consuming and challenging. For some people, spending so much time on learning is unimaginable. 

Social trading is a type of trading that gives individuals the opportunity to copy and execute strategies used by experienced and professional traders. By replicating the activities of highly-skilled traders, you can earn profits in an easier and more efficient manner.

But, does it always work? Is it safe to do? What are the things that you should do before choosing social trading? In today’s guide to what is social trading, we are going to discuss all the important factors that you should know and consider.


5 Things You Should Know About Social Trading

  • Social trading allows individuals to mimic the activities and performance of experienced traders in order to make profits
  • Social trading can be done in almost all markets, including Forex, stocks, crypto, and the like
  • Social trading is perfect for traders who do not want to invest too much time in market research and analysis
  • Social trading platforms are used to let individuals copy others' strategies
  • This method of trading can also help individuals to avoid making emotional trading decisions

What Is Social Trading in Forex - Definition & Meaning

Becoming a part of the social trading network can be quite beneficial for some traders. Over the past few years, social trading has become very popular around the world, and many regard it as the next step of the social media evolution. 

Although this concept dates back to 2010, social trading is still regarded as a fairly new idea. It allows users to have constant access to information about the market without having to do market research and analyses on their own. 

While some traders work very hard on technical and fundamental analysis, social traders receive the same information by following these experienced traders. In social trading, information about the market is generated by other users.

This allows traders, especially beginners, to have the opportunity to trade without having to spend many hours on market analyses. Social trading allows individuals to receive or provide help to others in the market. 

Apart from providing beginners the opportunity to make profits, social trading can also be viewed as a great way for beginners to learn more about the market. Watching experienced traders make decisions and analyze the market can be very useful for beginner traders to understand how the prices are moving in the market.

Who uses social trading?

A social trader is a person who attempts to make profits without having to do extensive analyses or create and test their own market strategies. But, who uses this strategy, and why would anyone think of it? 

Everyone has their own reasons for using social trading. For some, it is the only way they can trade due to a lack of knowledge and understanding. Others simply do not have enough time to do market analyses and research on their own. So, they decide to trust well-experienced traders with market analysis to make the decisions and then simply copy them.


While many people have the misconception that social trading is specifically aimed at beginner traders, this is just not true at all. In fact, there are many Forex traders in the market who have a lot of experience, but still prefer to opt for social trading, as they would rather be doing something else than analyzing market data.

At the end of the day, social trading can be used by anyone and can be used for all different asset classes.

Things to Know Before Jumping Into Social Trading

Before you decide to get started with social trading, there are certain things you should know about. One thing to keep in mind is that not everyone will enjoy it. Social trading is not for everyone, as it limits the control you have over the orders you execute.

First, you should know a little bit about social trading basics. When talking about social trading, it is important to know that it is quite a new thing. One of the first social trading brokerages was established just a decade ago when eToro started offering its services. After this, many others were created and this new concept took the market by storm. 

It is very common for beginner traders to blow their accounts when they are just getting started, losing all their money and leaving them with a bad view of trading. By using social trading, the chances for such occurrences are lowered significantly.

Thanks to social networks for traders, market participants are connected to one another in real time. This allows novice traders to witness and replicate the trades performed by veteran traders. This can be used by beginners to trade with a "safety net" and make stable profits, even if they don't quite understand the reason for the trades being made.

But, traders should understand that they can’t trust everyone. For this reason, it is always good to have at least some understanding of the market. 

For example, let’s say that you are using this kind of social network for trading stocks. It is advised that you always check the trading portfolio of the investor you are copying to ensure that they are making consistent profits and know what they are doing. Maybe you want to copy the trades of one of the best stock gainers in the market, that's great, but it is still useful to check their portfolio. 

Along with making sure that you are following someone that is proficient at their job, it also helps to know some general concepts of how the market works. So make sure to try and learn from these experts while they do the heavy lifting.

Getting Started With Social Trading

Social trading's popularity has skyrocketed over the past few years. Because there are so many options for traders to choose from, it can get quite hard to decide which social trading platform to use. 

There are some things that you can look out for to ensure that you are trusting the right person or group of people when getting started. Below, we will discuss the most important things you should look out for when deciding which platform to use and which trader to follow. 


Understand your wants

The first, and probably one of the most important things that traders should do is to understand what they are looking to accomplish. There are a lot of social trading networks available in the market today, but not all of them are equally good.

To know which one to choose, you have to understand what your goals are. For example, if you are looking for opportunities to use social trading with stocks to make short-term profits, you should not use a network that focuses on long-term investments. Simple, right? Well, this can easily be overlooked and you might suddenly be finding yourself in a situation like a GME short squeeze.

Without knowing what your final goals are, you won’t be able to find the social trading network that works best for you. So make sure to have a clear vision of what you are aiming at.

Choosing the best social trading platform to use

Because of the huge popularity of social trading investment networks, there has been a boom in the number of social trading platforms popping up. This has left the would-be trader with so many options available that it can be difficult to choose which one to use.

One of the most important things to focus on when choosing social trading platforms is safety and security. You can check the safety standards of the network by doing a quick background check on it. 

Try to find other traders who are part of the network and ask them what they think about the services, how useful and profitable it has been, and so on.

Following traders

There are many options for beginner traders when it comes to copy or social trading. When discussing the differences between social trading vs copy trading, it can be noted that copy trading is simply a sub-category of social trading. 

With copy trading, you follow the exact trades that a single trader is making. With social trading, you are able to see the trades being made by a larger network of traders, allowing you to pick and choose between different traders and trades.

This is a very popular way for beginners to make profits from the Forex trading market without having too much insight as to how they are making those profits. It lets newcomers choose the trader who they can actually trust and then follow their lead.

In most cases, social trading envisages becoming part of the larger community, while copy trading is mostly between one professional and one beginner trader.


Private messaging & information access

Private messaging is one of the best ways for individuals to learn detailed information about things they are interested in. Most of the best social trading platforms available out there offer traders the opportunity to have access to millions of other users who you can talk with. 

By using private messaging, you should be able to easily learn more about the major developments in the market. This opportunity can also be used by traders as a way to ask experienced and highly skilled individuals specific questions relating to the market in order to better understand how they are making decisions about their trades.

Private messaging can also be used by newcomers to try and predict price action. By taking a look at the same data that is analyzed by professional traders you can get some insights into how to set up good trades.

Another very important aspect of social trading is that it offers individuals a very informative and rich environment in which to learn.

Pros & Cons of Social Trading

Social trading has managed to become very popular over the past few years due to the many advantages that it offers to individual traders. At the same time, social trading also comes with several disadvantages that you should keep in mind.

Below, we will discuss the main advantages and disadvantages of social trading, to help you decide whether it is a good fit for you.


No research needed

One of the biggest advantages of using social trading is that it takes away the need to analyze the market on your own. Market analysis and research can be very tiring and demanding on individual traders. 

In most cases, Forex traders are doing both fundamental and technical analyses in conjunction to find out how prices will be moving in the market. On the other hand, social traders do not have to do market research and analysis at all. 

When using social trading, you are trusting the information received by professional traders. This way, things are made a lot easier and beginner-friendly. This is a huge advantage of social trading, as individuals are not required to spend hours overseeing the price movements.

Connects you with other traders

Another huge advantage of social trading Forex is that it allows individuals to connect with other market participants. Having good connections can be a key factor in making good Forex trading decisions. The more traders you know, the more trading styles you will be able to see and learn from. 

It is especially important for beginner traders who find it hard to understand how the trading markets work to have “roll models” to learn from. By taking a look at how experienced traders are taking care of their market positions and how they approach price movements, it can be a lot easier for beginners to learn how to trade Forex.

Social trading is like a network where you will get to know other people and learn from the mistakes and successes that they have made.

Your emotions have less effect on profits

Trading can be very emotional, especially for beginner traders. It is not uncommon for those who have just started trading to be driven by greed to earn more profits, or by fear of losing their money; both of which will lead to problems down the line.

Thanks to social trading, you don't face these kinds of emotional issues. Since you won’t be trading on your own, you will be able to relax more and make sure that you do not make mistakes that could blow your account and lose all your cash. 

Controlling greed and fear is very hard for Forex traders, and it takes a lot of experience to learn when you should stop trading.


Little to no control over the final outcome

While social trading comes with numerous advantages for Forex traders, it would be impossible to say that it is not associated with some disadvantages. In fact, there are several of them that traders should really take into account.

One disadvantage is that you have very little control over the final outcome of your positions. Since you are trading according to the decisions made by other traders, you won’t be able to have full control over your profits or losses. 

For some traders, this is very bad as they want to be in control at all times. If you are one of those, it might be better to avoid social trading altogether.

Misleading information

Although it is not true for all social trading networks, there are some organizations that are deliberately trying to come up with things that will get in the way of people making profits. In fact, there have been some networks in the industry that got blocked because they provided misleading information to individuals. 

This is why you should be very careful when choosing a platform for social or copy trading. Since there are so many of them available now, it can get quite hard to tell which ones are legit and which ones are trying to take their clients for a ride. Always ensure that you are only putting your trust in highly reputable companies, by researching them properly beforehand.

Distancing traders from the market

Another disadvantage that you should keep in mind is that social trading can distance traders from the market. This is because all the important decisions are made by others and not yourself.

While it is true that there are many people who actually learn from this experience, some might feel distanced from the market and find it hard to learn anything new at all. 

Things We Learned From This Guide on How to Do Social Trading

  • Social trading helps beginners to copy the steps taken by experienced traders and make profits
  • Some people use social trading because they don’t have enough market knowledge, while others simply do not have the time to trade on their own
  • Social trading has become exceptionally popular over the past few years, and it is still considered a fairly new concept
  • There are numerous social trading platforms available in the market which connects beginner and experienced traders alike
  • Social trading can be used by beginners to see how experts are trading and learn more about the market from those in the know

FAQs on Social Trading

How do I start social trading?

The first step is finding a social trading platform you can trust. Then, you can open a live account, connect with experienced traders in the market and use the platform's services to start trading. Finding the best social trading brokers is not easy as there are so many of them available. Make sure that you put your trust in a legit one that is safe and secure by doing some due diligence before opening an account.

Can you make money from social trading?

Yes, you can make money from social trading. A social trader can make money without having to do any market analyses or research on his/her own. Rather than doing market analyses on your own, you will be making trades in the market according to the findings of research done by experienced traders.

Is social trading good for beginners?

Yes, social trading, and especially copy trading, is very good for beginner traders. If you do not have any experience in trading, it can be very hard to make profits in the market on your own. With a social trading network, you are able to trade without having to do all the tiring and hard things associated with Forex market trading. Not only can social trading help you to make better profits, but it can also be used to learn more about trading by seeing how experts are doing it.