What are social trading and copy trading?

Social trading can be described as those activities that take place or facilitate interactions between traders to strengthen the crypto community. On the other hand, copy trading is an element of social trading that allows users to imitate the trading operations of other traders, in particular experienced or professional traders.

As industry players and professionals in the crypto space and Blockchain technology, it is useful to understand why these terms are different and how they are similar. Not only will we better understand these concepts, but it will also make it easier for us to explain them to those who may be new to the industry.

What are the advantages and disadvantages of copy trading?

There is no magic trick to understanding how copy trading works. Once traders make a successful trade, they have the option of sharing their trades with other users. If they decide to share, then traders who are following copy trading can choose to copy them.

There are benefits to both parties in copy trading. In addition to potentially more trading benefits from copying the practices of professional traders, copy traders gain knowledge and new techniques that may be useful to them in the future.

Those who choose to share their trades receive a commission, usually in the form of a percentage or a fraction of the profits each time their trade has been copied. These incentives encourage and motivate professional traders to share their trades with other users to copy them. In this respect, copy trading is a win-win situation.

This has helped the practice of copy trading to quickly become popular. As more new traders join copy trading, they gain more practice and become better traders. In turn, they are more likely to share their own success with future traders who join copy trading to reap the additional rewards of commission for following their copy trading. However, there are some precautions that should be observed. It is no secret that many of those who use the copy trading feature are predominantly amateurs. Because of their inexperience, they may copy unfavorable trades that are unprofitable in the long run.

A common mistake made by new traders who engage in copy trading is that they are quick to copy others, especially those with a large following. It may not always be the case that traders with a large following are trustworthy.

Why is social trading so important to the industry?

According to Statista, the number of crypto coin users grew by 25% between the second quarter of 2019 and the second quarter of 2020, reaching an all-time high of 50 million. Therefore, it is clear that more and more people are looking for new investment opportunities in the crypto coin industry, but a large part of these investors are newcomers. Getting involved in social trading activities is a perfect way for them to start their journey in the cryptomint industry.

When traders share information about trading or industry events, they will get more information about trading. They can even share ideas or ask questions about trading procedures to get information from those who know.

However, the influx of newcomers makes it a responsibility for Immediate Edge currency companies to ensure that they do not jeopardize the continued growth of the crypto community. Traders who offer social trading should screen traders to ensure that they do not deceive others or engage in behavior that creates distrust within the industry.

Knowing that they are using a secure social platform will give investors and leaders more confidence and help boost the reputation of the crypto sector.