What are Social Trading and Copy Trading?
Social Trading and Copy Trading are both similar kind of platforms which provides the beginners and inexperienced the opportunity to invest in binary options.
In this context Binary Options are such options for asset pricing trading of which based on the predicted price of a specific product or asset in a short specified time.
The payoff of binary trading is two types:
- Cash or nothing
- Asset or nothing
The face value of this kind of option is always less than $100.
If the value of underlying product changed as predicted the investor will gain the differences between the amount he invested and $100.
On the other hand, if the value of the product does not changed accordingly he will lose the amount he invested.
Social Trading is a trading process in which basically a platform is provided to monitor and follow the limit order’s and trades of other traders.
This platform is somewhat similar to social platform which enables the users to share their views and opinions.
A person can easily make investing decision by following the major group or an individual expert person who is continuously at the winning position.
Types of Social Trading:
Sending the signals if the followed one makes a move in trading purpose.
In this trading system the trading position is automatically changed if the peer group changes their position.
It is a trading forum or group that shares their views and opinions and make a decision collectively.
Copy trading is simply copying an investor‘s move without making any further judgment.
Benefits of Social and Copy Trading:
Making a community ofinvestors who assume the risk share the returns.
This types of trading systems work as learning tools to investors.
An expert trader’s skill and knowledge is distributed among the users of the same platform.
Problems with Social and Copy Trading:
Investors dont study well before making a trading decision.
Investors only seeing the ranking based on success of the investors.
But they are unable to measure success and failure ratio of that investor they are following as the platform does not provide any information about the volume of trading of the successful investor.
Differences between Social Trading and Copy Trading:
An investor can exercise the trading move by observing the expert/winning one
It provides the investor an option to copy or not to copy other’s decision
An investor has to exercise the trading move by observing the expert/winning one
It lefts the investor without any option rather to adapt the move of other investor.
Some online software are developed for these two types of trading system. Such as:
These software enable investors to follow the top one in respect of region or products.
In a conclusion, Social Trading and Copy Trading are investing tools which allow investors to make investment easily rather than using own judgment.
The success of these types of investment solely depend on choosing the right group of investors to follow.