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Crypto Social Trading: How Does it Work and What to Consider?
Although cryptocurrency trading may sound profitable with a promise of a financial freedom breakthrough, it is not all that realistic for newbies promising, thanks to the enormous risk it poses due to insane volatility. In addition, Crypto trading requires extensive trading knowledge and trading experience. You’ll need the skills to read and analyze trading charts, analyze analytics reports, understand reports, and keep up with news trends. This may be challenging for beginners, but they can employ social trading to catch up, become established crypto traders, and make substantial profits.
Social trading presents how new and experienced traders can automatically mimic or copy other successful traders’ strategies with consistent results (lead traders) to become successful. This guide will inform you of what you should consider when social trading and the best platforms to enhance your social trading skills.
Social Trading Explained
Social trading is a form of financial trading that brings the “social” element into trading. The trading method allows traders to observe their peers’ or colleagues’ trading strategies and follow their strategy using Copy Trading or Mirror Trading. Therefore, you can achieve the same results as professional traders without knowing much about crypto trading or years of experience trading cryptos. Social trading has taken the crypto space by storm to create automated platforms that automatically allow users to choose the traders and the trading strategies they want to mimic or copy.
Social Trading takes two forms: Copy Trading and Mirror Trading. Copy Trading merely is copying positions from a trader perceived as a skilled trader. On the other hand, Mirror Trading refers to automated algorithmic trading where traders trade to ‘mirror’ the trading activities performed by a professional trader.
How Does Crypto Social Trading Work?
Long gone are the days when social trading was done manually. Today, crypto social trading is fully automated, where the platforms integrate several functions that allow users to automatically copy or mirror trading activities/strategies from their chosen traders. Everything on these platforms is automated, from selecting an ideal trader and copying their trading strategies to implementing them on your account.
Almost all crypto social trading platforms are linked to a marketplace where users can access professional traders selling their trading skills and strategies. Users can also follow several traders and implement several trading strategies simultaneously.
What’s the Cost of Social Trading?
Different platforms levy different costs. But generally, most social trading platforms allow users to buy or sell a trading strategy for free. However, crypto exchange platforms charge users trading fees for any trade conducted on the platform. The significant role of a social trading platform is not to generate revenue by charging users a fee. Instead, they are tasked with increasing trading volumes so that the exchanges increase their incomes via trading fees. Additionally, traders who share their trading strategies or activities are rewarded a commission on the crypto exchange fees.
Therefore, social trading platforms can be a source of passive income for traders who share their trading strategies via these platforms.
Advantages of Social Trading
Crypto social trading comes with numerous perks, especially for beginners. They can copy trading strategies from established traders and make substantial profits while learning crypto trading simultaneously. In addition, social trading is automatic, meaning that you don’t need to monitor the markets and analyze charts constantly, which is challenging and time-consuming. With crypto bots and Bitcoin robots, you shouldn’t be concerned about following the strategies of your favorite trader and copying the trade to your account-this is done automatically 24/7. Other benefits of social trading include:
- Sharing trades is a way to earn passively.
- Deeper insights into market analysis attributed to opened trades
- No third parties are involved allowing traders to interact with each other directly.
- They are maximizing profits by copying or duplicating successful trading strategies.
- Users get an opportunity to build experience and knowledge in crypto trading.
Factors to Consider in Crypto Social Trading
There are several things you ought to consider to be successful in crypto social trading. The first crucial factor is the success level of a trader. You need to analyze the trader’s results to gauge whether their trading strategy is effective and consistent. Some social trading platforms allow users and the community to rate traders and share their experiences with them. You would want to copy someone with a high rating.
It would help if you also researched the legitimacy of the social trading platform. For example, analyze the currency supported by the platform, the currency you are considering buying, plus features integrated into the platform. This will give you a rough idea of the platform before signing in.
It would help if you also regarded the general factors in trading cryptos, such as only investing money you can comfortably afford to lose, diversifying your portfolio, avoiding Fear of Missing Out (FOMO), withdrawing profits at intervals, and using stop-loss for day trading.
It’s also crucial to note that social trading doesn’t eradicate the crypto trading risk. Social trading involves taking someone’s trading plan and implementing it into your account. In so doing, you’re trusting a third party’s judgment, which may fail to go according to plan and result in a loss.
What is the Best Cryptocurrency Social Trading Platform?
Shrimpy is the leading all-in-one portfolio management and automated crypto trading platform. The platform offers a comprehensive portfolio management solution and integrates many features, including bots for automated trading. Other key features include rebalancing tools, a back-testing suite, and other Social Portfolio features that enable crypto traders to optimize their trading and portfolio management seamlessly.
On the platform, users can easily follow and view thousands of strategies and portfolios using the social tab on the dashboard in the same way as social media. Users can implement the same trading strategy as the leading trader on the platform with just a single click. The platform supports over 700 different coins across 16 other exchanges.
eToro is a renowned platform that integrates excellent social trading tools for crypto and Forex trading. The social trading tools offered by eToro enable users to access investment companies that professionally manage portfolios and link up with top traders with extensive knowledge in crypto trading. Users can click on the Popular Investor Dashboard and discover ideal trading strategies. The platform is free to join but charges a withdrawal plus rollover fees.
Other crypto social trading platforms include Zulutrade, NAGA Trader, Covesting, and Investy.
Crypto trading is no walk in the park. It requires extensive experience, knowledge, and financial discipline as well. However, with the challenge posed by crypto trading, social trading can be a solution, especially for beginners. Social trading allows you to follow a lead trade, implement trading strategies in your account, and achieve similar results. Moreover, social trading will enable winning traders to earn passively by sharing their trading activities. Numerous social trading platforms are available in the crypto space today, and they connect traders to a vast pool of expert traders for better profits.