What is Social Trading?
When learning a new skill, it’s always a good idea to look to the wisdom of the masters of that skill. There’s a reason why people study Magnus Carlsen’s chess games or Serena Wiliams’s running forehand.
Social trading platforms offer that same insight so you can learn trading tips straight from the best.
Social trading is a form of trading where investors follow other traders’ strategies and trading behavior. By copying or mirroring the techniques of professional traders, novices can learn and earn — even without prior knowledge of financial markets. Social traders can rely on these observations rather than (or in addition to) technical analyses.
Social trading functions a bit like a social network. Picture Facebook, but instead of a feed full of photos of people from high school, you have access to your trading network’s transactions and interactions. You can use this network to inform your trades and maximize your profits by learning straight from sources you trust.
This wealth of trading information is particularly useful when you’re hard-earned cash is on the line. And it’s all too easy to lose money in the stock market. You might have heard the oft-repeated statistic that 80 to 95% of day traders are unprofitable. In fact, research suggests the truth may even be north of 95%.
So, why do so many traders end up with less cash than they started? Newbie traders might end up making rash emotional decisions, trying to “get rich quick,” or failing to diversify their assets. And without proper research, a novice trader starts off disadvantaged by a statistically unlikely chance of success.
That’s where Social Trading comes in.
How Does Social Trading Work?
In a nutshell, social trading platforms or networks offer a way for traders to view the data feeds of other traders to inform their trading or investing decisions.
For example, if you join the ranks of Alpha Impact social traders’ ranks, you must register your account and select the trader(s) you’d like to follow. Then you can connect your exchange account, and the platform can execute your desired trades automatically.
Any social trading platform has a few key components.
Social trading platforms offer users access to transparent information on traders’ activities and backgrounds. This data allows members to assess the credibility of traders they follow using factors like the contributors’ overall market sentiment, performance stats, and past positions.
Using this information, novice and experienced traders alike can benefit.
There are three main categories of trade in the social trading ecosystem:
- Single trade: A trader places a single non-social trade.
- Copy trade: One trader places the exact same single trade as another trader.
- Mirror trade: One trader automatically copies another trader’s every trade.
As a result of these activities, traders can work together in cooperative trading teams, sharing research and pooling funds. This way, rather than competing, traders work together to face and beat the market together.
Some platforms also make it possible for you to copy a peer trader’s entire portfolio, follow their dividends, and copy their account withdrawals.
Benefits of Social Trading Platforms
In the crypto world, there’s a lot of noise from conflicting analyses and wild predictions. As the crypto market is still in its early stages, it can be difficult to know which opinions to trust with your money.
Social trading helps you cut through the noise by watching and learning from the best. By accessing the actual trades of experts, you can see where their actual funds go and how they behave in real-time. This can reduce your chances of taking losses while you’re “earning and learning.”
Experts say this form of trading can even shorten an amateur trader’s learning curve as they learn from the best, duplicate their trades, and analyze patterns of what does and doesn’t work.
Another positive aspect of social trading is that it empowers traders of all kinds, including amateurs trying to get their foot in the door. In 2015, a World Economic Forum report called social trading networks “low-cost, sophisticated alternatives to traditional wealth managers.” By tearing down barriers to entry, social trading platforms have the potential to democratize crypto investing and innovate the status quo.
About Alpha Impact
Crypto Made Easy.
Alpha Impact is a social trading platform designed to bring trust to crypto trading. Whether you want to copy an expert trader automatically or you’re already a crypto trader and want to build and monetize your following, we’re building the infrastructure to take the guesswork out of crypto trading.
Traders on the Alpha Impact platform are some top-performing crypto traders. In good markets or bad, our traders are incentivized to share their trades and trading strategies through the Alpha Impact platform. Finally, a place where users can filter through the noise and learn about crypto trading from experts with a visible track record. Even better, traders have an incentive to share their investment thesis, analysis of the market, and the reasons behind their trades.
We share our fees with traders, meaning that there is finally an incentive for expert traders to share their activity and views with crypto enthusiasts and beginners.
Built by experts from the traditional finance space, our philosophy is to empower everyone to become a crypto trader. Whether you’re a beginner wanting to learn from an expert, or an expert wanting to get paid, we’re here to democratize access to this industry, one trade at a time.
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