What is Copying of Trading, anyway?

Social trading is not necessarily Copy Trading

A portion of social trading is Copy Trading, where trading ideas of selected traders are simply copied or automatically replicated. The disadvantage of Copy Trading is that the actions of the traders occur offset in time and cannot be reproduced with the same conditions in most cases. But investors can often decide whether they follow all actions or only individual trades.

With Copy Trading platforms, the prerequisite for using the platform is not only registering, but also maintaining a platform-specific broker for investing in the strategies published there.

Copy Trading providers often come from the field of foreign currency trading (Forex, CFD trading) which is not regulated by the stock exchange. In this case, the price setting is done by the broker himself. However, genuine providers in this area build up the corresponding reserves (“hedging”). Nevertheless, the so-called “additional funding obligation” may come into play for investors, where the investors must cover losses that go beyond the capital they invested.

The compensation model of the traders active on the Copying of Trading platforms is usually based on the number of transactions in the brokerage account. Thus, these traders are very active and often act by the minute with the goal of increasing the number of their own trades.

Learn about Social Trading with wikifolio.com

Comparing Copy Trading and Social Trading with wikifolio.com

Get informed about Social Trading with wikifolio.com