Guru Tips: Select a Social Trading Network
So, how do you go about selecting a social trading network and platform that meets your needs? For the purpose of this guide we’re mainly focusing on to the networks that we’re actively using and have reviewed. These are also the current market leaders. When we add and review a new network and platform, we’ll adjust this list.
We’ve listed a number of important questions below which will allow you to filter through the list. Answer the ones which are important to you and see which network(s) you’re left with.
Alternatively you can use our ‘What is the Best Social Trading Platform for Me Tool‘ to show you the best networks and platforms for you from over 30 based on a few simple questions.
What are your risk reward expectations?
In terms if risk we’d order the social trading networks as follows (lowest first) – however please note that because all of them allow you to increase leverage, in the end it’s always up to you:
Ayondo is the only social trading network which rewards their traders not just for the profits they make, but also for their (low) risk management approach. If the trader takes more risk during a month (i.e. high drawdown), their commission % will be reduced. Hence, overall, their leading traders seem to be more risk conscious than those on other networks which reward traders for profits only (and hence may attract more risk taking). With ayondo your allocation is also managed proportially to the traders account (i.e. if they risk 1%, only 1% of your balance will be at risk). Most of the traders still send signals from demo accounts (which obviously tends to allow for a more risky approach), though the amount of real money traders is increasing rapidly on their network.
With eToro trades are also copied proportionally in your account in relation to the allocation for each trader. However eToro applies a default CSL (Copy Stop Level) to any trader you copy of 40%. I.e. this means that when this trader loses more than 40% of the money you allocated to them, your copy relationship is ended. The CSL was put in place by eToro in order to limit your overall exposure to any one trader, though you can always overwrite it manually from 5% to 95%.
limit the amount you can allocate per trader to 20% (i.e. they force you to spread the risk). However, there’s nothing stopping a trader from risking 100% on a single trade so you can technically lose your full allocation of that trader in 1 trade (or 20% of your account).
The risk you take is totally up to you and how you configure your ZuluTrade account settings. Depending on your settings, 1 trader or even 1 trade can technically blow your full account. However you can limit the risk by applying the correct money management settings and by using their “ZuluGuard” feature. In terms of risk management, of all the networks, ZuluTrade probable offers the most comprehensive set of tools to limit the risk per trader (e.g. you can limit losses on the account or per trader and add plenty of restrictions on the traders you copy).
In terms of potential rewards:
ZuluTrade probably allows you to take the most risk/leverage and hence offers the highest potential profits. In fact, with ZuluTrade everything is up to you. You can technically make a lot of money by risking a lot of your equity per pip on just 1 trader. E.g. assume you have $100 in your account and you allocated, $10 per pip to 1 trader. If they do 1 trade and they make 10 pips, you’ll double your account with just 1 trade. However, if it moves 10 pips against you, you’ll lose your full account balance (10x$10) in 1 trade. The point we’re making here is that while ZuluTrade give you all the tools to limit your risk, they don’t force you to do so. Hence if you aspire to make exceptional returns with little capital outlay you can try this with ZuluTrade by applying high risk account settings (similar to playing an online casino).
With Tradency and Tradeo you also pretty much select how much to risk per signal and hence profit (and risk) very much up to you.
While your results are proportional to your allocation, ayondo allows you to increase the leverage per trader. So leverage of 2x means if the trader gains 2%, your account will gain 4%. Hence using a high leverage number allows you to go for quick high rewards, though obviously means also high risk and the potential of losing all your allocation.
With eToro you’ll find both high risk and low risk traders to follow on eToro. However because you can only allocate 20% to any 1 trader, even if they double their account in a week, it doesn’t double your account.
Do you want to try with a demo account first?
ZuluTrade, eToro, ayondo, Tradeo, Darwinex and Tradency all offer free practise accounts (see list of social trading demo accounts here)
Do you want to choose from a small subset of traders to follow (i.e. let the network do most of the selection process)?
Darwinex, because they let you choose from about 50 pre selected systems. However, as mentioned in our reviews, from our experience there’s no guarantee that traders which have been pre-selected by the networks consistently outperform the best traders which share their signals on open networks (i.e. where limited vetting is done).
Hence whether you choose from a sub-set or a larger list, it’s still best to do your own research and check whether the trader’s profile and trading strategy matches your own risk profile. All social trading networks provide some kind of ranking and search functionality. Ayondo, ZuluTrade and myfxbook all offer good advanced search functionality in our opinion. eToro is lacking a bit on that front.
Do you want low slippage?
Slippage is the difference in the price you get in your account and the price the trader you copied got in their account. As such high slippage can significantly impact your results. From experience the lowest slippage is with integrated broker social trading networks such as eToro, ayondo and Darwinex. Obviously that’s not too much of a surprise since with those the traders (signal providers) and followers (copiers) all use the same platform, giving them the same spreads and a smaller time delay between the copying of the trades. When the trader is with broker A and you’re with broker B, obviously there’s a higher change of some small times delays occurring due to the integration between the 3rd party social trading network and those brokers, while the spreads may also differ.
Do you want to invest less than $10,000?
Basically any network allows you to invest from less than $300. The only two platforms which used to have high investment requirements (Signal Trader and FxPro SuperTrader have both closed). Minimum investment requirement are listed in out social trading network features comparison table.
Do you want your account to be managed in a currency other than $USD (e.g. Euro or £GBP)?
eToro is the only network which only allows accounts in $USD. All other networks support multiple currencies and for the broker independent networks the choice normally depends on the broker you choose. All will allow Euro and GBP accounts and quite a few also JPY and AUD accounts. List again in the comparison table mentioned above.
Do you want to copy binary options traders?
If you prefer binary options trading to forex trading (maybe because it’s easier to manage the risk), then ZuluTrade, PorterFinance and AnyOption both allow you to copy successful binary option traders.
Do you want a personal account manager?
eToro is the only two network which in our experience offer a personal manager (with eToro this is for accounts of at least $20,000). All other networks do provide phone, email and/or live chat support.
Do you want social interaction?
Not everyone uses social trading networks just to automatically copy other traders, and plenty of professional and retail traders use them as well to share trade ideas. If your main aim is social interaction and to discover the market sentiment of other traders, then you’ll probably find eToro, Tradeo and Agea (Streamster) the most ‘socially active’ networks. Myfxbook also has a very strong and active community section. And you may find ZuluTrade’s “Social Charts” feature where traders leave comments real-time on charts useful as well.