Nowadays people feel the need to share. A lot. Just open Facebook and look at all the pics of other people’s food. That kind of pics is the main reason why I don’t really use Facebook; I don’t care what you’ve had for dinner last night and I don’t need you to tell me “It’s Friday! Yay!” ‘cause I can figure it all by myself. That part of the social experience is not very exciting to me, however, I find the social aspect of trading binary options a lot more interesting and I believe it can benefit traders in a lot of ways. And I am not talking about copy trading because these are two different things. Which one is better in my opinion? Read and find out.
What is Copy Trading? Monkey See, Monkey Do
Copy trading is the ugly, dumb brother of social trading and I don’t really care for it but of course, I have to explain myself, I can’t just throw words in the air. Let’s start at the beginning: What is copy trading? Basically, you receive a notification that some guy opened a trade and you copy that trade on your account. Blindly. You don’t have a lot of information about the trader you are copying and you don’t know why he opened that trade. You cannot see the analysis behind the trade and usually the information about the guy’s trading style is scarce, meaning that you don’t know if he is a trend follower or a counter trend trader, you don’t know exactly how big his account is and how much drawdown it can sustain. On top of that, you cannot see the details of his past trades, you cannot get a feel of his trading history and more importantly, you cannot talk to the guy. It might not seem so at first, but talking to the trader you are following is important because once you know why he is opening certain trades, you can decide whether to do the same or not. Ok, to sum it up, copy trading means mimicking on your account what other guy is doing on his account, without learning anything and even without understanding the reasons of a trade.
What is Social Trading? Now it Gets Interactive
Social trading is more than copy trading because people come together and work towards the same goal. The social aspect is represented by the interaction between traders, the dialogue, the sharing of technical analysis, together with pics and reasons why a trade has been opened. You still have the structure of leader (experienced trader) and follower (newbie trader) but the guy being followed explains his trades and his strategies, answers questions and, why not, improves his trading with the help of others. Usually the best environment for social trading is an online forum, but many of these forums lack a trading platform to bring people together. If you are only discussing on the forum and then open trades on your platform, the social aspect fades away a little but when that forum also offers a common trading platform, it enhances the social experience. Not to brag or anything, but at the moment we are the only forum that also offers a common platform (CommuniTraders) where you can test your strategies and share your analysis, follow others or allow them to follow you.
The Differences Between Social Trading and Copy Trading
I think that the most important difference is that through social trading you can better yourself as a trader, but if you are simply copying someone, you have no chance of learning new things. After all, what’s there to learn from a notification that says “Trader X – Put – 15 minutes expiry”?
Another major difference is that copy traders cannot talk about a trade before it’s open (not possible after, either, but that’s not the point right now). This is especially important for short term trades: if you’ve missed the notification by a few minutes, your trade could very well expire Out of the Money while the trade of the guy you are copying could be In the Money. With social trading, where discussion is encouraged, people can talk when a trade is shaping up and the Leader (or whatever you wanna call him) can announce that he will open a trade soon, if A or B condition is fulfilled. That way the followers can be prepared and open the trade at the same time the Leader does.
With Social Trading, you are always 100% sure you are following a real person – after all, you talk to them. But with Copy Trading, most of the time you are actually copying a bot or some type of software. Considering how many new bots and trading apps hit the market every day, do you think it’s so difficult for a brokerage or a signal provider to set up a notification system? Nope, not really. And things get even worse when you are using automatic copy trading because you can lose your account in seconds if something goes wrong with the bot that sends the signals/notifications.
And the Winner Is…
The clear winner is by far Social Trading in my opinion. Copy trading doesn’t work most of the time and the majority of signals are given by trading software with poor overall performance. Currently the only true Social Trading environment is CommuniTraders because you have a forum to discuss, share and learn, but you also have a trading platform, with leaderboards and account statements so you know exactly whom you are following. Am I being subjective? Of course, but the fact still remains that CommuniTraders is the only place where you can meet real traders, trade together and have a bot-free environment – only real users and live trades, verified by us. And did I mention it’s Free, with no strings attached?