Social trading – or “copy trading” as it is also known – is an increasingly popular activity for traders. There are numerous advantages to this relatively new form of trading, not least of which is that you can have an expert trade on your behalf.
The surge in popularity of social trading has led to a plethora of new sites popping up and there are a range of options now for those looking to copy another trader.
However, the set up of these platforms varies widely – in particular how they expose you to risk and the quality of traders you can copy.
Fortunately we have tested a number of social trading platforms here on the site and looked at their various advantages and disadvantages. We take a look at the best ones below.
What is Social Trading?
Social trading is quite a broad term that covers a variety of meanings depending on the situation.
It tends to include:-
- Purely “social” trading – referring purely to the social aspect of following and interacting with other traders, e.g. on social media sites like Twitter or specific trading sites.
- Copy trading – allowing you to automatically copy the trades of other traders, either directly on a site (e.g. eToro) or via a broker (e.g. Zulu Trade).
- Mirror trading – where you automatically copy (or mirror) a trading strategy or algorithmic system, again either directly or via a broker.
For the purposes of this article, when we use the term “social trading” we are focusing primarily on copy/mirror trading, as whilst interacting socially with other traders is nice, it’s something that pretty much any platform or website can offer.
Copying other traders and risking money on it is a whole other matter however and the quality of the platform you use can significantly affect what kind of results you achieve.
What to Look Out For with a Social Trading Platform
There are numerous features of social trading that make it very attractive, particularly to novice traders. Firstly, it enables you to copy the trades of a professional or expert trader, who you otherwise might not have access to.
It’s essentially passive, meaning once you have chosen your trader(s), allocated funds and selected your risk level, you can just let it run in the background and go about your day. You don’t have to study charts, the markets, new cycles and so on and worry about adjusting your positions, setting up new trades and all that – the trader you are following does that for you.
And it’s – well, social! You can interact, chat and exchange ideas with other traders and see how they go about trying to make a profit from trading.
So in theory all this sounds great, right?
Well there are also some serious issues to be aware of when using a social trading platform, which can catch out the unaware. These include:-
- Exposure to risk – it can be difficult to tell how much money you are actually risking when you follow a trader. Each platform has a different approach to allocating funds and they don’t tend to be very clear. Some expose you to much more risk than others
- Traders’ records – getting a full picture of a trader’s history is crucial but often you are only given a summary or partial picture. This can obscure their true abilities and make a trader look better than they actually are.
- Traders vs. investors – there is a distinct difference between some of the people you can follow on these platforms. Some are “traders” in the true sense of the word in terms of entering and exiting positions over a short period and banking profits/losses. Others are more like “investors” – buying and holding stocks for the long term. Both approaches are valid and can work in their own way, but it’s worth knowing which kind of person you are following at the outset.
These are some of the main factors to bear in mind when using a social trading platform, but are by no means the only ones.
Some of the platforms handle these issues better than others, which we will explore further below.
Top Five Social Trading Platforms
Okay, so let’s get onto looking at our top five social trading platforms. These are in descending order, from five to one and based on a range of factors including:
- Usability:- how usable is the platform? Is it easy to navigate, intuitive and give you the information you need without having to spend ages looking for it?
- Risk Control:- how effectively does the platform control the risk you are exposed to? Do they allow you to blow your capital easily or are there safeguards in place?
- Quality of Traders:- how good are the traders on the platform? How long back do their records go – are they long-term successful traders or just flashes in the pan?
- Transparency:- finally, how transparent is the platform? Do they show the traders full results history, show their open trades as well as their closed ones and make everything easy to understand?
Taking all this and other factors into account, we then award each platform an overall rating.
Anyway, let’s get on with looking at our top 5 rankings:
5. Dupli Trade
- Usability: 2.5 out of 5.0 stars
- Risk control: 1.5 out of 5.0 stars
- Quality of traders/strategies: 3.0 out of 5.0 stars
- Transparency: 2.0 out of 5.0 stars
- Overall rating: 2.5 out of 5.0 stars
Dupli Trade is a mirror trading site where you can choose from a small number of their selected strategies to mirror. You need to connect your broker account to the platform in order to follow the strategies. There are 11 compatible brokers at the time of writing.
There are normally around 10-15 strategies to choose from on the platform and you are given an overall summary of their results:
We covered some of the main issues with DupliTrade in our review, but in summary we found the lack of transparency and user-friendliness to be the main concerns. During our test on demo mode the results achieved were unclear and it only appeared to give us the option of using $100,000 stakes, rather than say $1,000 per strategy.
At first glance the strategies look good in terms of their results but you are not able to access a full trading history of the strategies and we found the platform confusing in general. There was little guidance or clarity for example on the risk allocation during our testing and indeed we lost $20,000 on our demo $100,000 account during our trial, after which two of the three strategies we had been following were removed from the platform.
So whilst we like the concept of being able to mirror hand-picked trading strategies, taking into the overall experience we are only able to award DupliTrade 2.5 stars overall.
4. Copy FX
- Usability: 4.0 out of 5.0 stars
- Risk control: 2.0 out of 5.0 stars
- Quality of traders/strategies: 3.0 out of 5.0 stars
- Transparency: 3.5 out of 5.0 stars
- Overall rating: 3.0 out of 5.0 stars
Copy FX is a copy-trading facility that operates in conjunction with the Robo Forex forex broker. You need to set up a Robo Forex account – that is the only broker currently available with the Copy FX service.
Once you have done so, there are a large number of traders/strategies to choose from, with some have strong-looking records and a few who have been on the platform for a number of years:
When clicking on one of the traders, you can view a detailed breakdown of their stats with info such as yield, profit, max drawdown and trading pairs used and get a full trading history, which is good to see. They don’t appear to display open trades though, just the closed trades, so it could be deceptive if the open trades are in large deficit.
Although it’s a bit of hassle to set up both the Robo Forex and CopyFX accounts, once you have done that it is quite a user-friendly platform. We like the layout and the way the information is presented, which is very clear.
One aspect to be aware of – and this is not unique to Copy FX by any means – is that you have to pay commission on the profit a trader makes you in a given period. This could be 30% of profit made in a week for example. If they make you a profit one week and a loss the next, you don’t get a refund on the loss but have still paid the commission on the profit.
This can mean for example that the trader may have broken even over two weeks, but you are substantially down. This is one of the quirks of copy trading unfortunately and the only viable alternative is to have a fixed subscription fee model.
One aspect we weren’t too impressed by on Copy FX was the risk control element. During our live test of one of the strategies on the platform (the VIP Trading Club) we used the “proportional” settings but it doesn’t state how this is calculated and customer service did not help clarify it for us. As it turned out we lost a substantial portion of our starting capital and it appeared the risk level was not appropriate.
Overall then we like the presentation and transparency of Copy FX, but feel like the payment structure and risk apportion could do with some improvement, so award the platform three stars.
3. Naga
- Usability: 4.5 out of 5.0 stars
- Risk control: 3.0 out of 5.0 stars
- Quality of traders/strategies: 4.0 out of 5.0 stars
- Transparency: 2.5 out of 5.0 stars
- Overall rating: 3.5 out of 5.0 stars
Naga (previously known as SwipeStox) is a social trading platform where you can copy other traders. There are hundreds of traders to choose from, but you can sort them by searching under “Top Traders” and then by the amount of profit they have made, time period and location.
You can see how much total profit a trader has made, how many people are copying them, win ratio and so on:
One aspect we like about Naga is how user-friendly it is. Everything is pretty intuitive and it’s a very nicely presented site. It also doesn’t require you to connect a broker account as you copy directly on the platform which makes it easy – Naga itself is the broker.
As you can see from the image above, there are some traders with strong-looking records on there, although some of them have relatively short records only going back a few months, so be careful of those.
When you click through to a trader’s profile, there’s a “feed” with recent news and updates on the trader’s activities, much a social media site.
You can also view the trader’s stats including a profit graph, the number of copiers, which instruments they trade, largest winning and losing trade etc. In this sense it provides a good summary of a trader’s record.
From an aesthetic and UX point of view, Naga scores highly then. However, whilst the summary of a trader’s stats is good, they don’t show a full trading history. In fact they only show the last 20-30 trades, so that could definitely do with improvement. They also don’t show you a trader’s open trades, which can present a distorted picture.
From a risk management point of view, they give you the option to use a percentage of the volume the trader is using or a fixed amount per trade. Having the percentage option is good in theory, however in practice it can lead to large losses as some traders greatly vary the volumes they trade with. So whilst you may be following them with what seems like a conservative amount, suddenly this can shoot up and leave you with a margin call or having a position closed out.
Using a fixed amount per trade is somewhat safer, but means you won’t match the results of the trader as they are likely to use larger volumes for their highest confidence trades, which won’t be reflected on your account. We would like to see greater protection of users’ funds from Naga, as their current options are likely to leave inexperienced traders exposed in particular.
We also noted during our review of Naga that some traders just copy other traders on the platform, meaning you can have your trades duplicated or triplicated, so that is something to be careful of. There is also no demo mode to test it out first, which is something we think all social trading platforms should have.
In summary then we feel like Naga is a very user-friendly and attractive site, but needs some work on the transparency and player protection fronts.
2. Etoro
- Usability: 5.0 out of 5.0 stars
- Risk control: 4.0 out of 5.0 stars
- Quality of traders/strategies: 3.5 out of 5.0 stars
- Transparency: 3.5 out of 5.0 stars
- Overall rating: 4.0 out of 5.0 stars
Certainly the most popular and well-known of the social trading platforms with over 20 million users worldwide is Etoro. In many ways it was Etoro that made social trading into the popular phenomenon it is today.
One of the main reasons for this is the quality and usability of the platform, which is intuitive and easy to understand for just about any user including inexperienced ones. It also doesn’t require you to connect a broker account – Etoro itself is the broker as such so you just copy directly on the platform.
You can view traders by categories such as “Editors’ Choice,” “Most Copied” and “Trending” where you will see a summary of the top traders in that section:
A plus point for Etoro is that they clearly spend quite a bit of time vetting the traders and learning more about them. Each trader has a risk score ascribed to them and those in the “Editors’ Choice” have a short bio describing them and their methods.
Clicking on a trader you can then see the trader’s feed, much like Naga, with that social media feel.
You can check out the stats for each trader, with key metrics such as what type of instrument they tend to trade, their success rate and average profit and loss per trade.
There is also a monthly breakdown of their results, which is a nice quick visual way of viewing the trader’s performance:
One feature that is lacking from the trader profiles is a full results history. This should be part of all copy trading platforms in our view.
An area where Etoro scores well is in the risk control. We followed a trader on the platform for ten weeks and our capital was always protected to what seemed like a safe level – losses did not take away a significant portion of our bank. There are no risk setting as such – Etoro selects the appropriate levels and although we don’t know exactly how it does so, from our own experience they seemed sensible.
In terms of the traders on the platform, there are some good ones to choose from but most of them are what we would call medium- to long-term stock market investors rather than traders.
There is nothing wrong with that in itself of course, but it might be the case that some of the gains people are making is due to the strong stock market performance of recent years and they might struggle to maintain such performance in a bear market. It could also mean that some of their long-term open positions might turn south in a downward market.
So it would be nice to see more forex traders on the platform and those who engage in shorter-term trading as this is something Etoro lacks compared to its competitors.
Overall though given its excellent user experience, sensible risk management and trustworthiness we feel that Etoro deserves a four star rating and a place towards the top of these rankings.
1. Zulu Trade
- Usability: