Social Trading Review – Apps, Strategy, Networks and Brokers

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Contents

Interactive Brokers Review

A winning combination of tools, asset classes, and low costs

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  • Account Minimum: $0
  • Fees: Maximum $0.005 per share for Pro platform or 1% of trade value, $0 for IBKR Lite

Interactive Brokers (IBKR) ranks very close to the top in our 2020 review due to its wealth of tools for sophisticated investors who are interested in tracking global investing trends. The firm makes a point of connecting to any electronic exchange globally, so you can trade equities, options, and futures around the world and around the clock.

Interactive Brokers introduced a Lite pricing plan in fall 2020, which offers no-commission equity trades on most of the available platforms. Interactive Brokers still charges a small fee for its IBKR Pro customers. We’ll look at how Interactive Brokers stacks up in terms of features, costs, and resources to help you decide if it is the right fit for your investing needs. Aside from this Interactive Brokers review, we’ve also reviewed the Interactive Advisors robo-advisor service.

Key Takeaways

  • Rated our best broker for international trading, best for day trading, and best for low margin rates.
  • Wide array of asset classes (including stocks, options, futures, and bonds) in 125 markets in 31 countries, using 22 currencies.
  • Has offered fractional share trading for several years.
  • Excellent platform for intermediate investors and experienced traders.

Who Interactive Brokers Is For

Interactive Brokers primarily serves institutional investors and sophisticated, active traders around the globe. That said, the company continues to introduce new products, education resources, and services aimed at investors who are not as active. Making the experience less intimidating for newer or less active investors is still a work in progress for the firm. In terms of serving its core market of active investors and experienced traders, however, Interactive Brokers is incredibly competitive. In addition to unparalleled market access, IBKR has layered on a staggering array of tools that can meet almost every conceivable trading need.

Extremely smart order router

Wide range of offerings around the world and across asset classes

Mutual Fund Replicator finds less expensive ETFs

Streaming data runs on a single device at a time

IBKR Lite customers cannot use the smart order router

Small or inactive accounts generate substantial fees

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Pros Explained

  • Interactive Brokers’ order execution engine has what could be the smartest order router in the business. It stays on top of changes in market conditions to re-route all or parts of your order to achieve optimal execution, attain price improvement, and maximize any possible rebate.
  • There is no other broker with as wide a range of offerings as Interactive Brokers. Besides the direct access to global exchanges, IBKR has added a huge inventory of fixed income products, including many European corporate bonds and Euro-denominated government bonds.
  • Interactive Brokers’ mutual fund replicator helps you find lower-cost exchange-traded funds that are essentially identical to more expensive mutual funds. But if you prefer mutual funds, IBKR has nearly 12,500 mutual funds on offer.

Cons Explained

  • You can only have streaming data on one device at a time. If you log into your mobile app while still logged onto the TWS, you’ll be prompted to turn off streaming data on one of the devices.
  • The IBKR Lite order router prioritizes payment for order flow, which is not shared with the customer. IBKR Lite clients cannot use the Mobile Web platform or use any of the APIs that connect to Interactive Brokers’ trading engine.
  • Small or inactive IBKR Pro accounts may be subject to maintenance fees or data charges, and interest is not paid on cash unless you have a substantial balance.

Usability

Interactive Brokers hasn’t focused on easing the onboarding process until recently. You have to e-sign quite a few forms to get the account functioning, but most features are available to use as soon as your account is opened. You can open an account without making a deposit, but it will be closed if you don’t fund it within 90 days of opening.

Once you are set up, the Client Portal is a great step forward in making IBKR’s tools more accessible and easier to find. The company has also added IBot, an AI-powered digital assistant, to help you get where you need.

Everything about Interactive Brokers centers around Traders Workstation (TWS). TWS is a powerful and extensively customizable downloadable platform, and it is gradually gaining some creature comforts, such as a list titled “For You” that maintains links to your most frequently-used tools. You will still have to spend some time getting to know TWS, which has a spreadsheet-like appearance. The Mosaic interface built into TWS is much more aesthetically pleasing and it lets you arrange the tools like building blocks to form a workspace. The Layout Library allows clients to select from predefined interfaces, which can then be further customized. You can also create your own Mosaic layouts and save them for future use. In short, you will need to put time in to get the exact experience you are looking for, but the design tools that you’ll need are all there.

Interactive Brokers’ mobile app has almost all of the functionality of the web platform, though it is not nearly as extensive as TWS desktop platform. All the available asset classes can be traded on the mobile app. Any mobile watchlists you create are shared with the web and desktop platforms, and data streams in real-time. Streaming news on mobile includes Bloomberg TV, Real Vision, and IBKR Traders Insight. The fundamental research is solid and the charts are very good for mobile with a suite of indicators. It is worth noting that there are no drawing tools on the mobile app.

Interactive Brokers Review

Interactive Brokers general information

USA

Founded in: 1977 year
Headquarters:
Offices in the country:
Minimum Deposit: 10000 $
Website: www.interactivebrokers.com
Website languages:
Execution model: MM
Deposit currency:
Support languages:
Regulated by:
Mobile trading: iOS, Android
Types of offered accounts:
Affiliate program: Not
  • Traders from the USA
  • API capabilities
  • OCO orders
  • Web-based platform
  • Guaranteed stop loss

Interactive Brokers Forex broker description

Interactive Brokers is a very big name when it comes to the forex trading sector. This forex broker has been a constant in the forex business for almost four decades and still going stronger. Interactive Brokers was established in 1977 and started operating in 1978. Ever since then, it has managed to stick its head u in becoming a credible giant in this trade.

From its headquarters in the United States of America, it has managed to spread its influence to many other countries worldwide. At the moment it has its offices in India, Japan, Canada, Hong Kong, and the United Kingdom. This growth strategy was in a bid to take its services near to its many clients who are found all over the world.

Trading Accounts

Owning a trading account with Interactive Brokers will allow you to execute trades on its many financial trading instruments as well as enjoy their unique trading conditions. To own an account you will need to sign up for one using your valid details.

Interactive Brokers has two account types that have been specially designed to meet the needs of its respective clients. These are the free trial account and the individual account.

The Free Trial Account

The free trial account is also referred to as the demo account. This account type is designed to meet the needs of novice traders who have little or no idea of the forex trading concept. This account is free to sign up for and provides a simulated environment where the trader will be able to perfect his or her trading skills. They are also provided with virtual funds to help in practice for trade executions. This account type can also be used for refresher lessons by those who have forgotten about the trading concepts.

The Individual Account

The individual account is the standard trading account that Interactive Brokers offers. It is suitable for both experienced professional traders and novice traders. The following are the many features of this account type.

  1. Minimum deposit is $10000.
  2. Allows for hedging and scalping.
  3. Has the market type of execution.
  4. Allows the use of the United States dollar, the Canadian dollar, the Great Britain pound and the Japanese yen among others as its base currency units.
  5. Has a minimum position size of 0.25.

About Interactive brokers and Security Of Funds

The company was formed to provide trading services for the then young financial sector in forex trading. With this in mind, it managed to draw scores of clients who wanted to know more about forex trading and even participate in it. Over the years it has managed to grow in leaps and bounds cementing its name as one of the most credible forex traders around.

It has invested heavily in qualified and dedicated personnel who help their many clients with any arising issues. They wok round the clock for these reasons and will occasionally offer advisory services to the clients more so on matters concerning trading.

Interactive Brokers has managed to expand its territories to many regions of the world. This is in order to take its services near its clients. This has been very beneficial as it has managed to bring it near many business hubs such as Hong Kong and London where it takes advantage of the busy financial nature of these places to source for more clients.

The company is credible and it has proof of this courtesy of the many licenses under its possession. These licenses have been granted by the regulatory bodies in the countries it runs its operations from. Among the major points of focus by these bodies is the safety of clients’ funds. This has prompted Interactive Brokers to come up with the following measures to maintain this safety.

  1. Use of credible banks to store such funds.
  2. Use of technologically sound encryption techniques to keep off cyber criminals.
  3. Use of segregated bank accounts to separate the company’s funds from clients’ funds.

The following are the licenses that Interactive Brokers has:

  1. A license from the United Kingdom’s financial conduct authority (FCA).
  2. A license from the Hong Kong securities and futures commission.
  3. A member of the investment industry regulatory organization of Canada ( IIROC)

Trading Conditions

Minimum Initial Deposit

The minimum initial deposit is $10000 which will serve as your initial base capital in trade execution.

Commissions

No commissions are charged at all.

Trading Platforms

Interactive Brokers has some of the best trading platforms that have been specially designed for its clients’ needs in a smooth trading process. These platforms are the desktop TWS, the IBKR mobile platform, and the IBKR webtrader platform.

The Desktop TWS Platform

The desktop TWS platform is a downloadable platform that is suitable for your desktop. Its features are:

  1. Easy to use interface.
  2. Lightweight software.
  3. Has advanced analytical tools.
  4. It is easily customizable.
  5. Real-time monitoring.
  6. Risk management.

The IBKR Mobile Platform

The IBKR mobile platform is a downloadable platform that will allow you to execute trades from your mobile phone. It has both versions for ios and Android operating systems. It comes with many features in analytical tools as well as advanced drawing tools. It is lightweight hence will not consume much of your device’s storage space.

The IBKR Webtrader Platform

The webtrader platform is the platform that will let you execute your trades from your browser. It is compatible with most browsers and is noted for its short loading durations. The webtrader platform is accessible by both the desktop and also your mobile device.

Promotions

The following are the promotions currently running on Interactive Brokers’ website.

  1. The refer your friend and earn a $200 bonus.

Withdrawals And Deposits

Interactive Brokers have very efficient and flexible transaction modes. This incorporates the use of credit and debit cards such as Visa and MasterCard. Bank transfers are also accepted. The transactions are instantaneous and will take a short time to reflect.

Briefly about Interactive Brokers

Interactive Brokers is a credible broker with many years in the business that grants it a higher level of expertise. It is really appreciated and beloved by clients, evident by the Interactive Brokers’ customer comments and reviews. This is a recommendable broker for professional forex traders.

Best Social Trading Platforms And Brokers 2020

Social trading opens trading and investing up to everyone. Social platforms (and brokers) allow traders to copy more experienced investors who share their trading information. Retail traders can see what professional forex traders do across the network and make exactly the same trades from their broker platform or app. Experienced traders can also benefit with social trading platforms like eToro, Zulutrade and Ayondo all keen to host profitable traders. Read on to see if social trading might suit you;

Top 3 Brokers For Social Trading or Copy Trading

What Is Social Trading?

Social trading is an area of trading which, its proponents say, democratises trading by making information more accessible to less-experienced traders and investors.

Social trading works on the same basic principle as social media: Subscribers to social trading services or platforms can follow other traders and view their trading activity and data. They can then use this information to guide their own trading.

Some forms of social trading, such as copy and mirror trading, allow users to automatically copy the trades of others.

Regulation is as tightly controlled as the rest of the finance and investing industry.

Let’s explore the history of social trading, its different forms, and its inherent pros and cons.

Comparing Social Trading Brokers

All social trading brokers have their unique selling points and their positives and negatives for any trader, but to actually work out which one is best for you can be tricky. Here’s a quick guide to the main things to look out for.

Trading Costs

A key comparison factor is the total trading costs you might encounter between one firm and another. These may not be as clear as you would hope:

Spreads And Fees

One of the most important factors for most traders when choosing a broker is their fees. Whether you trade forex or ETFs, costs mount up over time.

This is more complicated than a simple look at whose fees are highest, because you’ll need to think about how you plan to trade and so which features you’re going to use and whether there’s a fee attached.

It’s often free to open an account and trade, but brokers may charge fees for anything from the number of withdrawals you make to the dealing spread, so check that their pricing plan won’t end up taking an unreasonable chunk of your earnings.

Minimum Deposit

Another point of difference between brokers is the minimum trade size or the minimum deposit when you’re starting out.

Some brokers are designed for complete beginners, and so don’t make large demands when it comes to their minimums, while others are designed for higher rollers but may be cheaper as a result and offer better leverage.

As with everything, the right answer depends on your trading style.

Deposit And Withdrawal

Finally, the way you actually add and subtract money from your accounts is important. Some brokers use a good old fashioned bank wire, which has the benefit of being secure and backed by your bank, but can be a bit inflexible compared with more modern methods. Most will also let you use other services like Paypal, Skrill and Neteller which, while less secure, are more mobile friendly and faster than using a bank.

eToro – Copy Trading – Lower Risk Examples

Trading Platform

How you intend to use you account will impact what sort of platform suits you best, and it is another important factor to compare. Do you need charting functions? Would you prefer automated trading? You need the right platform for your needs.

Ease Of Use

Brokers will either use a trading platform of their own design or a generic trading programme under their brand which you’ll use day to day.

This is another of the most important factors, because it’s the interface you’ll rely on to make your trades, and it needs to be right for you. When you’re just starting out the most desirable feature is usability.

Configurability

Trading is complicated enough without your platform making life harder, so a clutter-free display and a clear and logical layout are both important to help you get the most out of your broker.

Having the buttons in a sensible place, having useful shortcuts and quick read displays are obvious, but important when you’re starting out.

As an alternative, the next best option is a highly configurable interface with multiple trading windows, so that you can make it fit your needs even if it’s not perfect straight out of the box.

Performance

Once you’ve found a front end that you’re happy with, it’s time to look under the bonnet. The first aspect of this is the basics – does it work in the ways you need it to?

Execution Speed

How fast are your trades compared to other platforms on the market? Does it make the trades you intended accurately? All of these are important because even the best looking interface is useless if the product isn’t good enough.

Security

The second aspect is security. It’s impossible to guarantee you won’t be a victim of fraud, but the best you can do is to do your homework on your broker.

Make sure they have some kind of security policy, and that they can tell you how they secure your data and what steps they take to minimise risk.

Platforms with two factor authentication or deposit protection guarantees are a good idea, as are ones with more stringent financial checks.

Another way to protect yourself is to make sure that the broker is registered as a trader in your region, and that they are licenced to offer their services in the market, which ensures somebody makes regular checks on their conduct.

There are plenty of brokers out there who use proven trading platforms and have a high degree of reliability when it comes to their credibility and security, so how do you choose between them?

The next step is to look at their platform’s features. There is a huge range of options when it comes to features, so it really is a buyer’s market, and it’s up to you to decide how you want to trade.

Trading Hours

A simple one, but still important. Is trading available whenever markets are open or is there downtime when you can’t trade?

Some brokers don’t operate at unsociable hours where they’re based, which could prevent you from trading in a target market, or worse, your home one.

Asset List

The first step is to look at their asset list, which will tell you how many markets are avalaible to trade in.

Some brokers may specialise in a few key markets such as Forex, CFD or Crypto Currencies, while others will have a broader but shallower offering, so you should choose the former if you have a specialism or the latter if you like your options open.

A forex trader specialising in specific currency pairs will likely be happy at any broker, but other trading strategies might rely on a diverse set of markets with less correlation. So choice of markets is criteria that will be different for each person.

Functionality

Next up, what kinds of tools and widgets are there on the platform and do you need them? Brokers offer everything from news feeds to advanced analytics, so you should think about what you need and what’s included in the price.

Risk Management

One particular function that’s handy is risk management. Some brokers offer risk management tools that offer risk guidance and ways to stop losses from building, which can be handy when you’re starting out.

Mobile App And Research Tools

You might be content with a bare-bones package and the option to upgrade, but it never hurts to have tools up your sleeve if the price is right. A metatrader platform might be over complex, a binary platform too inflexible. It is an important consideration.

Two of the most important tools that most brokers will offer are the app and the analysis features, so you should pay particular attention to these when you’re doing your research.

You need to find out if the app is just as functional as the programme or if it’s more of an accessory to it, and how many models the analysis features offer.

Account Types

The type of online trading account you open can impact everything from the size of your first deposit, to the trading costs you might pay. Ask yourself what kind of account you need before making a comparison.

Margin And Leverage

Comparing a trading account can be more important even than comparing brokers because different accounts can radically change your experience of a platform, and with the right platform, it can unlock your full potential.

Many brokers go beyond basic accounts and offer more expensive Professional and VIP versions, which may contain elements missing from basic accounts that you need.

Paid accounts may have higher leverage, which will allow you to trade more assets than you have, a virtual necessity if you plan to be serious about trading.

Account Currencies

Some often also allow you to trade in more exotic currencies beyond the Pound, Dollar, Yen and Euro – such as the Real, Dinar, Zloty and Canadian Dollar – or cryptos like Bitcoin, Dash, Litecoin or Ethereum – which can greatly enhance your trading options.

Leading Traders At Zulutrade

Copy Trading

Copy trading offerings can vary. Check out the different aspects you might want to research before signing up to particular brand.

Follow & Lead

The ability to copy trades and be copied is what distinguishes social trading from other kinds, so the quality of the copy trading on your platform is of paramount importance.

The beauty of social trading is the ability to follow others in one direction, then make your own path once you’ve got where you wanted to go, and good platforms will enhance that ability.

Volume

The size of the pool of fellow traders to copy is important because it is more likely you’ll find like-minded traders in a bigger pool, so this is important for comparisons.

Amount Of Data

It’s also important to be able to see the history of a particular trader, how successful they are and what their strategies are, so that you’re not going in blind when you choose to follow someone.

Flexibility

Variety is also important, and you don’t want to be held back, so try and avoid platforms that artificially restrict how many traders you can follow, or limit the types or scales of trade you can track.

Customer satisfaction

Feedback

One of the best ways of assessing the quality of a broker is the feedback that other traders like you have given them, but you can also do your own detective work.

Simply using comparison sites can be one way to do this, and a legitimate broker’s rating will compare well to others on an equally reputable comparison website, but you can also check out their reputation on social media websites too to find out what others are saying about them.

Security Of Broker

Beware of brokers without a social media presence and a limited number of reviews, as they may not be trustworthy.

Another option is to check out their official credentials. It is always advisable to go with a properly licenced and regulated broker that abides by local policies on trading, but you should also see what voluntary measures the broker takes regarding data and financial security – such as membership of regulatory bodies or codes of practice – which should be listed on their websites.

It is also worth double checking the financial stability if possible.

Losing Percentage

Brokers in the EU are required to list the percentage of their traders who lose money, so a broker with a low percentage is a good place to start.

A large percentage of traders will lose, that is the nature of markets. But a higher losing percentage at a certain broker may mean trading costs and spreads are making profitability harder for traders there.

Education

Finally, part of the joy of trading is growing and learning as a trader to become better and more successful, and a broker who helps you do that is a real asset.

Some brokers will offer online tips, classes or video tutorials on everything from risk management to diversification, so try to take advantage of their advice and education where you can.

The History of Social Trading

Social trading is a logical progression from traders talking to each other about their day’s work.

Imagine a scene in the late 1980s where a group of traders are in a wine bar after markets have closed for the day: one tells the others about a position they’ve opened that looks sure to make a profit. The other traders like the sound of this investment and copy it for themselves the next day.

If you follow that scenario through the technological advances of the past three decades, you can easily picture this conversation being repeated through emails, then through chat rooms and other internet forums; each time with more and more people able to hear the conversation.

Quite quickly, the idea to charge people for access to the conversation was developed.

With the rapid rise of social media sites such as Facebook in the 2000s, it was only a matter of time before trading gained its own form of social media.

eToro was one of the first companies to capitalise, launching their OpenBook platform in 2020. Not only do OpenBook and other platforms allow traders to share their trading activity, they theoretically allow anyone to see what the experts are doing in real-time and learn from them (and copy trades in real time).

The secrets of the trading floor become common knowledge and everyone can profit.

Forms of Social Trading

Different platforms allow for different forms of social trading. Here are the most prevalent:

Copy Trading

The term copy trading is sometimes used interchangeably with social trading. This can be misleading as although copy trading is a form of social trading, social trading is not necessarily copy trading.

Copy trading platforms, such as eToro , ZuluTrade and Ayondo, allow investors to not only follow traders, but also to automatically copy their trades.

Traders are ranked according various criteria including profitability, career level, maximum drawdown (the largest amount of money they’ve lost after a bad run of trades), number of followers, risk etc.

Using this information, less experienced traders can decide who they trust and assign a percentage of capital to be invested in opening the same positions. For instance, for every £100 that Trader A invests in Stock X, you might set the platform to invest £10 of your money.

Your position closes when the trader’s does and you make the same relative profit or loss as Trader A.

Mirror Trading

Mirror trading is used in forex trading. Although it sounds identical to copy trading it has crucial differences, the main one being that the it is a strategy that is copied, rather than a trader.

An investor (or ‘mirror trader’) selects a trading strategy based on what currencies they wish to trade, how much money they want to make and how much they can afford to lose.

When a position is opened by the chosen strategy’s developer, the same position is automatically opened (or mirrored) in the investor’s account.

Mirror trading is generally used by more experienced forex traders as its fully automated nature can lead to a high volume of activity and so requires a larger amount of capital than copy trading.

Signals and Tips

Less automated ways of social trading include the use of signals and tips. These are generally provided by experienced traders for free (either on websites or through YouTube videos etc.) or through subscription services such as internet trading rooms.

There are also forex signal subscription services available. Signals are generated either by human analysis or by algorithm and can provide investors with a text or email alert when a forex signal matching a selected investment profile is generated.

Although signals and tips services generally cost money to subscribe to, traders still have a choice whether to act on each one. Choice of communication technology is key when using signals – speed is of the essence.

The Pros and Cons of Social Trading

There are of course benefits and risks of using social trading. Here are some of the major ones:

Advantages

Collective Knowledge

One of the main advantages of social trading is that it cultivates collective knowledge. Less-experienced traders subscribing to social trading platforms aren’t being given the opinions or strategy of one more experienced trader; they’re presented with a much wider range of information from multiple sources.

Trading Histories

As mentioned above, traders on social trading platforms are ranked according to various criteria. These give other users a degree of security as they can assess a trader’s credentials before they begin copying their trades.

Watch and Learn

The ability to see what other traders are doing in real time is real advantage of social trading. New traders have the ability to watch what other traders are doing and not only learn from it, but also make those trades themselves. In this respect, social trading can offer an exciting way to learn ‘on-the-job’.

Confidence Building

Trading can be a daunting, perhaps even lonely venture when you’re new to it and sat at home in front of your computer. Again, the collective nature of social trading is an advantage here. Because traders are sharing their knowledge and learning together, it can help build new traders’ confidence in their own growing abilities.

Emotion-Free Decisions

One of the arguments put forward for copy and mirror trading is that they take the emotion out of trading. Investment decisions are best made with the head and not the heart, and the sometimes pressured nature of trading can sometimes lead to misplaced decisions.

By automating the process to their specifications, a trader can theoretically let the algorithms make trading decisions based on logic rather than emotion.

Disadvantages

Whilst there are advantages to social trading, there are also risks and drawbacks:

Hidden Aspects

Although traders on social trading platforms are ranked according to their activity on that platform, their trading still retains hidden elements. For example, the top-ranked traders whose activity you decide to copy may have a large success rate but won’t reveal any of the following:

How much capital they have. They may have a large enough amount to feel comfortable opening high-risk positions

Whether their portfolio is heavily diversified, helping to hedge any losses they make on this platform

Unless you really do your research, it’s unlikely that you will be able to find out about the nature and success of their off-platform trading activity

How successful they’re going to be in the future

False Sense of Security

Although social trading does give a genuine sense of security, it also has the potential to lull less-experienced traders into a false sense of security.

It should always be remembered that trading is never easy. There is always risk and any system that claims to make you vast profits with little or no effort should be approached with caution. Social trading is no exception.

Although the process becomes more transparent and allows you to follow many different seemingly successful traders, it is still possible to make big losses very quickly if you have no idea what you’re doing.

Overconfidence

This follows on from the last point. Imagine that you’re following only the most highly ranked traders on the platform and the first few trades you’ve copied have made a profit without you having to do much.

In such situations it’s very easy to become overconfident and leave the platform to its own devices. However, all traders can experience large drawdowns and, if you’ve not been keeping a close look at how the traders you subscribe to are doing, so can you.

As pointed out above, they may have capital available to risk which you don’t.

The only ways to hedge against potential losses when using social trading are the same that apply to any other form of trading:

  • Employ a proper risk management strategy
  • Keep a close eye on your trading platform, especially when copy or mirror trading
  • Do your own continual research on market conditions and outlook
  • Only put up capital you can afford to lose

eToro is a multi-asset platform which offers both investing in stocks and crypto assets, as well as trading CFDs.

Please note that CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 62% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.

Past performance is not an indication of future results.

Cryptoassets are volatile instruments which can fluctuate widely in a very short timeframe and therefore are not appropriate for all investors. Other than via CFDs, trading cryptoassets is unregulated and therefore is not supervised by any EU regulatory framework.

Best Social Trading Platforms

Modified date: December 4, 2020

Table of Contents:

What is Social Trading?

A social trading platform is a social network designed for traders. Instead of posting selfies, participants share their latest trades and strategies. It’s possible for you to pay attention to what someone else is doing, follow traders that have similar philosophies to you, and learn from them.

Not only can you follow traders and connect to a community of investors, but in some cases you can also execute trades on these platforms, copying what others do–and hopefully make some money.

However, social trading isn’t widely accepted in the United States, and you might not have the same access as non-U.S. traders for trading possibilities. Even if you can’t execute trades, though, you can still participate in the community and try some of the trading strategies on your own.

Social Trading Platforms that Allow Access to U.S. Residents

As noted, some of the instruments traded on social trading platforms, especially contracts for differences (CFDs), aren’t available in the United States. Additionally, some social trading platforms don’t have the proper licenses to operate in the U.S.

However, that doesn’t mean that there are no opportunities to get involved if you live in the U.S. There are some platforms that are available for U.S. residents. Here are a few.

eToro

eToro is one of the most well-known social trading platforms in the world. You can interact with other traders, get tips and strategies, and even copy their moves. In the United States, eToro has been slowly expanding its offerings.

Originally, when eToro came to the U.S. in 2020, it was only possible to use the platform for currency trading. Today, though, eToro is working to expand its offerings in the United States. As of July 2020, eToro Real trading is available in the following states:

  • Alabama
  • Alaska
  • Arizona
  • Arkansas
  • California
  • Colorado
  • Connecticut
  • Florida
  • Georgia
  • Idaho
  • Indiana
  • Iowa
  • Kansas
  • Kentucky
  • Maine
  • Maryland
  • Massachusetts
  • Michigan
  • Mississippi
  • Missouri
  • Pennsylvania
  • Rhode Island
  • South Carolina
  • South Dakota
  • Texas
  • Utah
  • Vermont
  • Washington
  • Washington D.C.
  • West Virginia
  • Wisconsin
  • Wyoming

If you don’t live in one of those states, you can still learn about trading and practice strategies by using the Virtual Portfolio. Also, some features and markets still might not be available to you, so pay attention to what’s available when you trade.

For the most part, eToro is easy to use, allowing you to quickly identify signals and use information to make your own trades or copy others.

Read More: eToro Review

ZuluTrade

This social trading platform focuses on the forex market, and there are only two brokers that U.S. participants can use with their social trading account. You can join ZuluTrade for free, and watch the trades unfold. Plus, there’s a demo account option, providing with the ability to try different strategies before you risk actual money.

ZuluTrade’s website is intuitive and easy to use. You can see market sentiment, based on the trades made by members, and you can also see the top performers and the amounts in their portfolios. You can also join as an investor, where you can select different strategies to copy and build your portfolio based on what’s been successful for others.

SwipeStox/Naga Trader

The SwipeStox app is available for iOS and Android devices and is owned by Naga Trader. Naga Trader is one of the main social investing platforms, and using the SwipeStox app allows you access to trading signals and the ability to follow traders and copy their moves.

Like many of the other social trading platforms, you need to work through a supported broker. With this unique app, you can look at trades and traders and swipe left or right to indicate what you like–sort of like Tinder.

It’s possible to follow trading signals for a number of assets, but trading options are limited for U.S. residents. Because SwipeStox is compatible with FXCM, you might be able to get in there, but if you do, you’ll face restrictions, similar to the types of restrictions you’d see with ZuluTrade.

Naga Trader does have a number of unique funding options, including cryptocurrencies.

Trading Motion

This company focuses on automated trading systems. While Trading Motion features more than 900 systems, only 600 are available to U.S. residents. However, if your broker is supported, you can pay a monthly fee to subscribe to a system of your choice. There are no demo accounts, and you need to look through the site to see if you can identify a system that you think will bring you success.

Once you’ve identified that system, you can use it to make trades. It’s important to stay on top of the situation, though, to ensure that you’re still getting the right approach for your money.

iSystems

Like Trading Motion, iSystems uses a system-based trading. There are almost 1,400 systems available to U.S. customers. The systems created must meet various regulatory requirements in the United States, so there are fewer systems available to U.S.-based traders than to those located outside the country.

However, if the system meets the requirements, you can choose from a variety of systems that were created by dozens of trading professionals. Just choose your system and activate the strategy through one of the more than two dozen U.S. brokers available. It’s even possible for you to act as a developer and create your own automated trading system.

FX Junction

You can join FX Junction for free, allowing you to see the forex trading signals of others, and automatically copy them from your own trading account. In order to use FX Junction, you need to already have a registered brokerage account that uses MetaTrader4 or MetaTrader5 platforms. Once that’s done, you can choose which signals from professionals you want to copy.

FX Junction uses what they call validated Signal Providers that you can follow. You might have to pay an AutoCopy fee, based on the provider you follow, but that’s the main cost you’ll see. If you become a Signal Provider yourself, you’ll then be able to receive additional profits from those that copy you.

Unlike many other social trading platforms, FX Junction isn’t actually a broker or deal maker, nor is it an asset manager or advisor. The company plays that aspect up, focusing on the fact that it doesn’t have any conflicts of interest.

Collective2

Like Trading Motion, you can pay a subscription to use an automated system that copies successful traders. You need to check to see if your broker is on the list of partners, though. For those interested in keeping trading costs lower, Interactive Brokers is on the list and can be a good choice.

With Collective2, you choose subscription levels based on how many strategies you want access to each month. If you want access to unlimited trading strategies, you might have to pay up to $299 per month. When you consider your situation, make sure you understand how paying a trading fee can cut into your overall profits.

Tradency

While not exactly a social network in the way eToro and ZuluTrade are, Tradency still uses aspects of sharing to allow you to copy trades made by others. Using algorithms, Tradency’s Mirror Trader generates strategies based on how professionals are making moves all over the world.

You can take a look at the different strategies and then use the platform to copy the strategies in your own account. You can see other traders’ portfolios of strategies, and get an idea of how to do the same thing with your own account. You’ll need to find your broker on the list, and realize that some instruments and investments won’t be available to you as a U.S. trader.

Peeptrade

Rather than setting up automatic trades, this social trading platform lets look into what’s under the hood for professional traders. You can “peep” at what they’re doing–for a subscription fee. You get emails and other alerts when trades are made so that you can go ahead and copy the trade on your own.

Joining Peeptrade is free, so you can kick the tires a bit. Some of the professional investors will even allow you to “peep” their trades on a trial basis before you start paying for regular access.

This strategy, using the MQL5 website, is a little different when it comes to social trading. You’ll need to be set up with the MetaTrader platform, using either MT4 or MT5. Because this is a common platform, there’s a chance your broker might use this.

The MQL5 website has a robust forum that you can use to get more information about forex trading, and interact with members of the community. On top of that, it’s also possible to subscribe to signals, so you receive them automatically. You can also buy systems developed by traders. The cost of the system depends on the trader.

However you do it, though, you use what you’ve learned in your own terminal. So, if you buy a system, you can then run it from your own MetaTrader dashboard. You can also find a virtual server to be constantly copying a trader’s moves and signals, without having to run it on your own.

Should You Use Social Trading Platforms?

Realize that a lot of these social trading platforms come with risk. Aside from being unavailable to U.S. residents in terms of legality, many of them use instruments that are considered risky, like currencies, and include CFDs, which are derivatives. In fact, there are some social trading platforms that won’t even let you sign up if you’re a U.S. citizen living outside the country.

However, there are social trading platforms that do cater to U.S. residents and will let you engage in trading–although it might be on a limited basis. You might not have access to the full range of markets and assets as a U.S. resident. Carefully consider what types of trading you might do. Many of the social trading platforms focus on forex trading, although it’s possible to find those that offer other types of trading.

Before you use a social trading platform, check to see if there’s a free trial or a demo account. Review some of the automatic strategies and look at some of the developers. Many social trading platforms allow you to see historical success, so you can figure out how likely you are to profit when you copy someone else’s signals. Also, pay attention to fees, since you might be on the hook for copy fees, autotrading fees and subscriptions, on top of regular trading commissions.

Finally, you can also join investing social networks to learn about trading and pick up tips, and then do your own investing based on what you learn. You don’t necessarily have to join a social trading website. Just by looking at what others are doing and discussing strategies, you can use your own brokerage account to mirror what you see online.

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