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Maaike Schouten July 11, 2022 Average reading time: 5 min

Social trading

The financial markets have evolved especially since electronic trading started some years ago. Several trading strategies have been developed by traders and stakeholders. Algorithmic trading which automates strategies and the entire trading process has also been embraced by traders all over the world. Perhaps, traders have learned that if they cooperate and share ideas, they can do better in their trading.

Social trading is the trading style that allows a community of traders to share ideas, knowledge, information, and trading strategies in real time. It gives traders the opportunity of analyzing another trader’s strategies, and learn or hone their trading skills. It is like a social network made up of traders of different levels of experience and expertise interacting and sharing market ideas, predictions, and information in real-time.

It encompasses mirror trading, copy trading, training, and sharing ideas in forex online forums. Mirror trading is focused on imitating the trading strategies of successful traders as broadcasted by the brokers while copy trading copies the exact positions of an expert trader.

Mirror trading is older than copy trading; it was popular around the late 2000s. Experienced traders usually program their strategies and host them on a brokerage server. This makes it available to all who wish to replicate the strategies in their trading accounts. This evolved into copy trading.

Copy Trading

Copy trading is the strategy of automatically or manually copying the strategies and trades of an expert trader and making profits along with the expert. The expert trader, often called ‘strategy provider’ enables other traders to copy his trades usually at a fee or commission. Though, a few providers let others copy for free. Newbies or investors search through the list of signal providers and make a choice. Most copy trading platforms are automated; that is, it copies all the provider’s trades to the copier’s account without any intervention.

The broker or social trading provider maintains a list of signal providers and their profiles. Prospective copiers can access this list and study each provider before making a choice. Info provided includes their trade history, number of followers, trading frequency, fees, success rate, and general performance statistics.

Once a trader makes his choice of a signal provider, he sets the copy parameters such as trading capital, forex pair, etc. He then activates the copy function; usually by clicking a ‘copy’ button. Then, the copy process becomes automated. Anytime the expert trader opens a position, it is automatically replicated in the copiers’ accounts. He only logs in periodically to check his account balance and monitor its growth. But, if unsatisfactory, the copier can also adjust the copying parameters, stop the copy process, or change to a new strategy provider anytime he wishes.

Today, the most popular social trading platforms are: ZuluTrade, DupliTrade, AutoTrade, MyFxbook, CopyTrader, etc

Social trading with MT4

MT4 is the most widely used trading platform for forex and contract for differences (CFDs). Consequently, many popular social trading brokers design their platforms to work with MT4. Even if you are trading with a broker that has no special platform for social trading, you can still participate directly from the MT4/MT5 platform.

This is because MetaQuotes; the developers of the MetaTrader platforms integrated social trading into their core business. They have the MQL5 website which has a forum, signal service, VPS service, market, and other trading tools.

The MQL5 forum is an active community with over 500,000 members. It has a lot of resources including questions and answers from actual forex and CFD traders. There is also the ‘MQL5 marketplace’ where traders buy and sell trading robots and indicators built for the MetaTrader platforms. Trading tools like Virtual Private Server (VPS) and economic calendar are also provided. You can also automate your trades using the ‘Signal’ service; which is a copy trading service on the website.

MetaQuotes also integrated the MQL5 copy trading feature directly into the platform. To subscribe to MT4 signals, two accounts are required: an MT4 account with a broker and an MQL5 community account.

Follow the steps below to begin copying the trades of signal providers on the MT4:

  • Log into the desktop version of the MT4 platform and also into the MQL5 community.
  • From the ‘terminal’ window, click the ‘signals’ tab.
  • You can scroll through the signal lists or click the headings to rearrange the order in each column. You can search by equity, price, number of subscribers, maximum drawdown, etc. You can also group signals of interest by adding to favorites.
  • Clicking on any signal opens its detailed performance statistics.
  • You can subscribe for a chosen signal by clicking on the subscription button and completing the payment.

 

 

If you are an expert trader and want to earn some money by letting others copy your trades, you can also do so on the platform.

Follow the steps below to register as a signal provider on the MT4:

  • Login to the MT4 platform and into the MQL5 community.
  • On the navigator window, under 'account', right-click your account to pop up a menu.
  • Select ‘register as Signal’.
  • It opens a form on the MQL5 website.
  • Complete the form and give details of your signals, such as server, subscription price, etc and click ‘add’.
  • Write the signal description in the language of choice; you write in up to 11 languages.
  • Click ‘save’.

Advantages of Social trading

  • It gives opportunities to investors, busy executives, etc to partake passively in forex trading and even make profits without knowing how to trade.
  • Top expert traders make a lot of money from their followers or copiers while they are just trading their accounts. This creates profits from commissions and also from trading.
  • Facilitates quick access to reliable and updated trading information.
  • Saves traders the time spent on training and analysis.
  • Forums and signals encourage new traders to learn faster.  

Disadvantages

  • Copy-trading may lead to laziness as a trader may relent on learning as long as they continue to make profits by copying expert traders.
  • Copy-trading often results in losses because the strategy provider’s capital and risk management settings may differ from that of his copiers.

Conclusion

Social trading is an all-encompassing trading system that enables a community of traders to share ideas, and follow each other’s trades and strategies. Copy trading is very popular because it allows even a newbie or investor to make profits from the forex market without even understanding how the market works or how to trade. Equally, a pro trader can as well make money if they have a huge number of followers copying their trades.

On the MT4/MT5 trading platform, you can make extra money by broadcasting your trading signals for other traders to copy; if you are an expert trader. You can also choose from the numerous strategy providers on the platform and copy their trades automatically at a fee.