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Social Trading?

Social trading, also known as social investing, combines the advantages of classic stock exchange trading with the innovations of social networks. Social trading networks offer their users two main options:

  1. On the one hand, the users can get in touch with each other and exchange ideas about developments in the financial world,

  2. On the other hand, social traders also offer service providers the opportunity to network with others in their own investment, e.g. B. by adopting successful strategies from other users.


This variant of social trading is also called copying trading. Depending on the provider, it goes so far that the entire portfolio of a successful user can be taken over with just a few clicks, so that your own investment imitates the performance of the respective user portfolio and ideally benefits from its success.

1. Benefits of Social Trading

2. What should you pay attention to?

3. Explanation of eToro's copy systems

4. How does copy trading work?

4.1 CopyTrader – Copy all trades trades

4.2 CopyTrader – Copy new trades

4.3 Paue copying

1. Benefits of Social Trading

Participation in the success of experienced investors

Above all, social trading offers newcomers to the stock and financial market the opportunity to benefit from the good performance of talented and experienced investors without them having to understand all the functional mechanisms and backgrounds of the capital markets themselves.

Easy to use

Anyone who is active in social media should not have any major problems with how social trading works. Most platforms are designed in a clear and intuitive way, so that even newcomers to social trading can easily get used to using the corresponding user interfaces.

External portfolios can be taken over with just a few clicks or swipes, so that there is no need to issue your own orders and limits or create savings plans.

Experience deepening

If you, as a user in social trading, not only copy the portfolios of successful signal providers, but also closely observe their development, social trading offers you a good opportunity to better understand how the financial markets work and to gain your own experience.

With a free test portfolio or sample portfolio, many providers offer their customers the opportunity to deepen their financial knowledge without risking their own capital.

2. What should you pay attention to?

  • What track record does the trader have? Of course you want to copy the most successful traders who have had the best returns in the past. eToro Copy Trader gives you the opportunity to view the trader's performance over the past months. Pay attention to how high the return was, but also how many months the good results were achieved. It is more important that there has been positive trading over most months, a high return is all the better.

  • What assets is the trader trading? We take a close look at the trader's portfolio – does he trade stocks, forex, commodities, cryptos? A diversified portfolio with several asset classes can make sense. Do you want to invest in the asset class(es) the trader is trading?

  • Risk score: Depending on the trading behavior and the selected trading investment, eToro assigns each trader a risk score. What is your risk tolerance? Risk-averse traders should receive a risk score of 1-3, risk-seeking traders can copy traders with a risk score of 4 or higher.

  • Followers: 10 or 1,000 followers? It makes a difference how many followers a copy trader has. Even if popularity is secondary compared to results/return: most traders can be recognized by many followers.

  • Diversify: The basic principle of risk diversification always applies: it is better to copy 3-4 traders who trade different assets than to go all-in with a single trader.

3. Explanation of eToro's copy systems

eToro's social features make our platform unique in the online trading arena. Both the CopyTrader™ system and the CopyPortfolio™ investment strategies rely on eToro's user base, which numbers more than 20 million people from over 140 countries. They are intended to give traders new opportunities to make profits.

4. How does copy trading work?

The Copytrader system is one of the main reasons why the platform is ranked among the leaders of the fintech revolution. The basic idea of the CopyTrader tool is quite simple: select the traders you want to copy, decide an amount to invest and automatically copy everything the copied trader is doing, in real-time, with you one click.

Beyond the basic concept of copy trading, the system includes a few other elements.

First, let's clarify a few terms:

  • "Copied Trader" means the trader you are investing in (copying).

  • “Copier” is the user performing the copy action (e.g. yourself).

Here are some important points to consider before copying:

  • The minimum amount that can be invested in a trader is $50.

  • You can copy a maximum of 100 traders at the same time.

  • The maximum amount that can be invested in a trader is $2,000,000.

  • The minimum amount to open a copied trade is $1; Trades below this level will not be opened.

  • If you manually close a copied trade, the funds from that position will be credited to your copy amount (i.e. the amount allocated to copy that person and not invested in open positions).

4.1 CopyTrader – Copy all trades

The CopyTrader system gives copiers the option to copy all currently open trades of the copied trader. For copiers who choose to use this method, the existing open trades of the trader they are copying will be opened on the following terms:

  1. The existing open positions will be opened in the copier's account at the market prices prevailing at the time of copying (not the prices at which the original trades were opened).

  2. The trades have the same Stop Loss (SL) and Take Profit (TP) as the original trade.

  3. They reflect the future actions of the copied trader, including changes in SL and TP and closing the trade, from the moment you start copying. If the copied trader increases their Stop Loss by allocating more funds to a position, your SL will be adjusted accordingly. However, your position amount will remain the same as the original amount. Because of this, the profit percentage may differ between your copy account and the copied trader's account.

  4. You can close a specific copied trade without closing the copy account entirely.

  5. If the copied trader opens a position in a market that is closed during the time it is being copied, the system will open a market order for the copier. Once the market is open, the order will be filled into a position at the first market price.

  6. To see all trades copied from a single trader, go to your portfolio and click on the trader's name.

 

Note: The trades are all opened in your account at the same time. You will see them take a slight loss in the amount of the spread between the buy and sell price to give you a real time view of the funds you receive when you close the trade. New trades are opened at the same opening prices as the copied trader opens them at, and the realized equity (account balance + investment amount) is used as the basis for the shares of copied trades. For example: A trade opened with 10% of the copied trader's realized equity will result in opening a trade in your copy account at 10% of the realized equity from the copy relationship.

However, this percentage can change if the copied trader changes their available account balance - this can happen, for example, if the copied trader makes a deposit or withdrawal. If one of these cases occurs, the account balance of the copied trader changes and your holdings may change as well. When the copied trader closes all open trades, the trade size ratios between their account and the copier's account are updated (again).

**These Terms of Use are subject to change at any time at eToro's discretion.

4.2 CopyTrader – Copy new trades

Copies who choose this method only copy new trades opened by the copied trader after the copying process has started. The following conditions apply:

  1. Only the trades opened after the copying process has started will be opened in the copier's account.

  2. New trades are opened at the prices at which the copied trader opens them.

  3. The shares of the new trades are determined from the realized capital of the copied trader (account balance + investment amount).

  4. SL and TP are identical to the original trades.

  5. All actions of the copied trader are automatically duplicated in the copier's account, including changes in SL and TP and closing trades. If the copied trader increases their Stop Loss by allocating more funds to a position, your SL will be adjusted accordingly. However, your position amount will remain the same as the original amount. Because of this, the profit percentage may differ between your copy account and the copied trader's account.

  6. You can close a specific copied trade without closing the copy account entirely.

  7. To see all trades copied from a single trader, go to your portfolio and click on the trader's name.

 

Please note: the distribution may change if the copied trader changes their available account balance. This can happen, for example, when the trader being copied makes a deposit or withdrawal, or closes an old trade that was open before you started copying it (if you chose not to copy trades that were already open). When one of these events occurs, you may get trades with different distributions than before.

**These Terms of Use are subject to change at any time at eToro's discretion.

4.3 Pause copying

With the new version of CopyTrader we present the new function “Pause Copy” which allows you to pause copying a trader without closing all currently open positions.

"Pause copying" can be set from eToro's portfolio page by clicking on the Settings button and then "Pause copying".

 

 

If "Pause copying" has been activated, no new trades will be opened under the copy relationship. However, all currently open trades are still copying the copied trader's SL/TP and closing actions.

Would you like to become a part of the social trading community?

 

You can open a free eToro account using the following button.

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