As a result of widespread access, ordinary people can now participate in trading on the foreign exchange and other financial markets, creating a wealth of opportunities for the ambitious trader. 

However, the rise in social trading has truly revolutionised the landscape by making it even easier and more attainable to trade the markets, with no prior experience or expertise. 

This trend is a natural by-product of the explosive growth of all forms of social media, channels, and communities online.

Small-scale, independent, online traders can now acquire market access and stake a claim to their own share of the pie thanks to the development of the internet and the introduction of online retail forex brokers who offer copy trading software.

Understanding social trading

The term forex copy trading refers to an emerging trend in which trading activity is shared in real time among members of the same trading network or community. 

Transactional moves, trading signals, ideas, and news all fall under the umbrella term “trading actions.” Being part of a group makes it easier for traders to observe and mimic one another’s trading actions. 

Using this software, novice traders stand to gain the most from social trading because they do not need to become experts in technical and fundamental analysis, financial performance analysis, or economic indicator monitoring.

Rather, they can simply sit back and let the more seasoned traders do the analysis, while the newer traders obtain the knowledge or even follow the resulting trading decisions via the social trading network.

Social trading options and approaches

The term “social trading” covers a wide range of activities. Many people confuse social trading with forex copy trading and mirror trading because they think all three names mean the same thing. 

However, copy trading and mirror trading are subsets of social trading as a whole. Therefore, we can identify three distinct forms of social trading:

Copy Trading

With copy trading, a trader’s portfolio is automatically and immediately linked to the portfolio of the trader they choose to follow, and all trades executed by the chosen traders are automatically copied into their portfolio. 

Therefore, employing the copy trading features of a social trading network enables users to automate the process of copying the trades of other users, saving them time and effort over manually gathering, analysing, and making investment or trade decisions.

Mirror Trading

Mirror trading, which is most popular in the foreign exchange market, is similar to copy trading in that it involves duplicating or reflecting trading techniques rather than individual traders. 

Therefore, a ‘mirror trader’ decides on a trading strategy based on the currencies they desire to trade, their profit/loss objectives, and their risk tolerance.

Trading signals

Social trading also includes less automated methods of trading, such as the sharing and use of signals and recommendations, in addition to the automatic methods of copy and mirror trading. 

Professional and experienced traders may offer trading advice for free through a social trading network, blog, website, or their social media profiles. Alternatively, brokers and others may offer paid membership services for trading advice. 

Forex signals, which might be the product of human analysis or custom-built algorithms, can be accessed for free or through a subscription service.