Social Trading vs. Copy Trading: Key Similarities and Differences

Social trading and copy trading are two common approaches that involve mimicking the trades of other traders. However, despite common misconceptions, the two are not the same.  

Key Takeways

➔ Social trading and copy trading share a few similarities but are two distinct strategies.  

➔ Social trading brings different traders together on social networks to leverage each other’s strategies.  

➔ Copy trading involves automatically copying another trader’s trades into your account.

Many traders believe social trading and copy trading are the same, but understanding the key differences can positively impact your trading journey.

In short, social trading is the combination of social media and trading. Copy trading is simply an imitation of master traders. Both strategies can be implemented across different asset classes, including stocks, commodities, forex, cryptocurrencies, or indices. This blog discusses what is social trading and copy trading, the pros and cons of social trading and copy trading, as well as the key differences between social trading and copy trading.  

What is Social Trading?

Nowadays, one of the most talked about topics in the trading community is “what is social trading.” It’s a trading strategy in which traders connect and socialise on social networks to share insights, analyses, and strategies for successful trading. It involves traders sharing investment advice with the social media community, where other member traders can follow or comment back.

Image: Social Trading, by Medium

How Does Social Trading Work?

Social trading involves traders influencing each other by sharing opinions on social networks.  To give a glimpse on what is social trading and how social trading words, we will take an example: Suppose you observe a trader who invests $5,000 in AI stocks monthly and earns an annual return of 25%. If you are not ready to invest $5,000 monthly, you can still invest $2,000 or $1,000 and aim for similar returns.

Pros and Cons of Social Trading

Below, we list the pros and cons of social trading.

Pros

• Learn from others

Social trading lets you quickly learn from other traders, exposes you to various opinions on trading, and allows you to discuss every new trading concept and strategy with fellow traders.  

• Strong sense of community

Your community's input can often be helpful during moments of market crisis and save you from huge losses.  

Cons

• Risk to follow without solid analysis

• Social networks contain plenty of fake news

• Unreliable or biased advice  

What is Copy Trading?

Copy trading is an integrated feature that allows traders to automatically mimic the moves of other traders in their accounts. It helps new traders participate in the market with minimised risks. Unlike social trading, copy trading is a more automatic and passive approach.  

READ: The Complete Copy Trading Checklist for Beginners

How Does Copy Trading Work?  

Copy trading involves following and automatically copying other traders’ moves into your account. It allows traders to simply follow the master trader and start copying in real-time. To decide on which master trader to follow, copy traders can evaluate their past performance by considering their:

• Portfolio diversification rate

• Trading strategy  

• Risk management approach

• Number of followers  

Pros and Cons of Copy Trading  

Below, we list the pros and cons of copy trading.  

Pros

Learn through copying

Copy trading lets you learn by copying experienced traders and exposes you to various approaches, which you can later execute on your own.

Requires minimal input

Copy trading is automated and passive, making it ideal for traders who lack experience or time.  

Diversify portfolio

Copy trading involves following one or more master traders with diverse trading strategies, making it an excellent opportunity for portfolio diversification and risk management.    

Cons

• Market risks, like in all trading  

• Tendency to copy an underperforming master trader

• Late execution risks depending on the  

Key Differences Between Social Trading and Copy Trading  

Image: Social trading vs copy trading, by WeCopyTrade

Below, we list the key differences between social trading and copy trading.  

The process  

Ⓐ Social trading involves traders sharing their investment tips, strategies, trading positions, and more.  

Ⓑ Copy trading involves simply following master traders and automatically copying their trades.  

Activity level  

Ⓐ Social trading is an active type of trading in which you interact with and learn from the trading community.  

Ⓑ Copy trading is a passive approach that requires minimum effort.  

Autonomy  

Ⓐ Social trading gives you a lot of autonomy, as you can learn from everyone but implement only the strategies you prefer.  

Ⓑ In copy trading, you can choose only the trader you wish to follow.  

Performance  

Ⓐ In social trading, your success depends on how well you implement the trading strategies you learn from others.  

Ⓑ In copy trading, your success depends entirely on the performance of the master trader you copy.  

Social Trading Vs. Copy Trading: Which One to Choose?  

Whether you choose social trading or copy trading depends on your investment goals, experience, and time commitment. Social trading fosters a community of traders sharing strategies, while copy trading offers a hands-off approach to replicate other traders’ success. Both models have their pros and cons, so evaluate which one aligns with your style.

At BitDelta, we offer a seamless copy trading feature you can get started with within a few clicks. All you need to do is choose a master trader from the dashboard–which you can find as “Most Copied, “Most Profitable,” and “Recently Joined”-- and make their success yours.    

Related Guides and Materials:

• What is Copy Trading?
• The Complete Copy Trading Checklist for Beginners
• How to Choose the Right Master Traders for Copy Trading 

Frequently Asked Questions (FAQs)  

1. What is social trading?  

Social trading involves building a social media network of traders who share insights, analyses, and strategies, which can be implemented to increase the chances of success.  

2. What are the pros and cons of social trading?  

The pros and cons of social trading are:  

Pros:  

• Learn from others

• Strong sense of community

Cons:

• Risk to follow without solid analysis

• Social networks contain plenty of fake news

• Unreliable or biased advice  

3. What is copy trading?  

Copy trading is an integrated feature that allows traders to automatically mimic the moves of other traders in their accounts.

4. What are the pros and cons of copy trading?  

The pros and cons of copy trading are:  

Pros:

• Learn through copying

• Requires minimal input

• Diversify portfolio

Cons:

• Market risks, like in all trading  

• Risk of following an underperforming master trader

• Delayed execution risks depending on the platform

5. Should I choose social trading or copy trading?  

Your choice of social or copy trading should depend on your investment goals, experience level, and the amount of time you are willing to invest.