What is social trading? Platforms, experiences and correct use

You don't have to reinvent the wheel to be successful on the stock market! Numerous Traders share their experiences, strategies and tips on social trading. You can share in these successes by imitating them - but there are no guaranteed profits here either. 

We have summarized the various methods and platforms for social investing for you and show you what you should look out for when using them!

Social trading - what's behind it

The internet has significantly changed our society. Traders and investors benefit in several ways: modern online brokers such as CapTrader now offer them simple and inexpensive access to the stock exchanges. But also the A wealth of information and knowledge and the possibility to share it at any time is to our benefit!

At Social Trading (also known as social investing) makes use of both advantages: Traders share their experiences and give an insight into their strategy and the positions they take. Other market participants can replicate them and thus also profit. 

How it works either automatically via a trading program or by manual execution. The former variant is also known as "copy trading" and offers a time advantage. This makes this method particularly suitable for trading strategies where every second counts. Users also benefit from the high degree of automation, which means that they do not have to open and close positions themselves. 

Manual execution, also known as "mirror trading", on the other hand, offers more control. Here, the trader receives the information from the professional trader, but decides for himself which of it he wants to implement. Manual execution involves considerably more work, but can offer more security and is particularly suitable for people who want to learn how to trade successfully themselves. 

The concept is made particularly exciting by the many strategies that are available! Hundreds of traders provide insight into their approaches. Not all of them are successful and some can only show losses; however, the large selection makes social trading enormously interesting and varied. 

You will find the various "templates" mostly on special social trading platforms or directly from the brokers. Some traders also offer an insight into their methodology privately, for example via their own website. 

Both free and fee-based offers are available, whereby Higher returns are generally associated with a corresponding price go hand in hand. Regardless of the costs, a Success not guaranteedResults may well fall short of expectations. 

Nevertheless, the concept of social investing is very useful overall and especially exciting for newcomers. You can realize your first profits and learn a lot by using the templates of the professionals. Advanced traders will also find interesting impulses and opportunities to expand their specialist knowledge. 

How does social trading work?

The Trading using templates is easy to implement and is therefore particularly popular with beginners. In its simplest form, social investing consists of just two steps: 

1. Find a suitable trader/template
2. Implement trades in your own portfolio

With the right broker, both points can even be easily combined. 

Of course, in practice there is a lot of work behind a successful social investing strategy and there are numerous aspects to consider! Above all Finding a trading plan that is actually lucrative can be difficult. 

Lucrative templates as a basis 

The success of social trading stands and falls with the Select the template you wish to "retrade". The range is extremely extensive! Every hobby trader can easily offer their own strategy and other people can imitate it. 

However, the results for a layman are likely to be rather mediocre - even a completely random selection of shares offers a statistically better performance than the average small investor. Instead, the aim must be to discover really lucrative strategies. Unfortunately, this is often easier said than done! 

When searching, you should note the following: 

• Provider of social investing strategies do not always disclose their previous return. This makes it difficult for potential imitators to recognize the methods that are actually successful. Alternative evaluation methods, such as the number of followers, do not provide an accurate picture. 

Wir empfehlen daher, only invest in providers with a verifiable, demonstrably positive return. In addition, it makes sense to first run the template on a CapTrader Demo account to try it out. There you can try out the method in a realistic environment, but using "play money". Only when you see positive results over a longer period of time does it make sense to start with "real" money. You can then easily open a regular CapTrader Open an account. 

• If the track record to date is visible and appears positive, this must also be by no means guarantee future success. The procedure can be changed, for example, due to changes in the general conditions (economic turnaround, change between Bull and bear on the stock exchange, changes in the key interest rate ...) become unprofitable in a very short time. 

As with all trading strategies, a Regular testing is advisable. So you can create a Detect diminishing returns in good time and switch to another template before losses occur. Self-defined limits ("I change strategy if the results fall below 8 % p.A. for four weeks in a row") are also a useful money management tool that can help you here. 

• Please also note the Costs of a social investing plan and the fees for your brokerbefore you decide for or against a method! The costs can quickly turn out to be disproportionately high, especially if the value of your custody account is low or if you only want to invest a small part of your assets. 

Some traders charge considerable sums for their trading templates and special premium offers can quickly cost 100 euros or more per month. The Costs for the execution of the trades are added. Depending on the broker, considerable costs are also possible here. 

In the worst case scenario, social trading will cost you several hundred euros per month - an amount of money that you can only "recoup" with a corresponding capital investment and good returns! It is therefore best to estimate the costs when selecting a trading template. 

Community Trading

The wide-ranging area of social finance also includes the concept of "Community Trading". Market participants do not just use the template of a single trader, but of a larger group. Social media networks and forums are particularly suitable for this and usually form the basis. 

Members discuss, analyze and optimize their trading strategies and investments here. The Exchange of alleged insider tips is an important factor. The aim is always to improve your own returns. 

However, not everyone has the time or inclination to actively participate in such groups. One possibility, however Benefit from the knowledge of the communityforms the Automatic evaluationArtificial intelligence is used for this and can, for example, capture the sentiment of traders on a specific asset (sentiment analysis). 

This is a Part of AI tradingwhich has several advantages for the user. For example, the programs in seconds to analyze millions of social media posts and contributions from other sites. Language barriers are also eliminated, so that users can use information from all over the world in a meaningful way. 

In addition, posts outside the "financial bubble" can also be recorded. This is useful, for example, to obtain opinions on products before investing in the company behind them. 

Social trading platforms: Which method suits me?

Social finance is divided into the following areas Copy trading, mirror trading and community trading. Each of these three fields represents a separate method, each of which Special advantages and disadvantages has. We have summarized below which users they are suitable for: 

1. copy trading

At Copy investing involves completely copying the activities of another trader. If the trader opens or closes a position, this step is passed on in real time. The brokers of the "followers" receive this information and execute the same trade automatically. 

This automatic conversion represents a Enormous time and effort savings represents! At the same time, however, it also forms a Significant riskas it is not possible to check the respective trades. You must therefore completely trust the retailer you follow! 

We recommend that this form of social investing only for demonstrably successful traders apply. In most cases, you should expect to pay fees, as such successful traders rarely share their approach for free. 

It also makes sense for copy trading, only a limited amount of capital to use. Ensure sufficient diversification and, if necessary, use several templates to limit the risk. If one of these social trading positions results in losses or even becomes completely worthless, you will only have lost a small amount. 

Special care is at the Combination of copy trades and margin trading offered! Higher profits are possible with leveraged trading, but so are losses. You can theoretically lose more money than you initially invested. 

If your trading template achieves negative results, your losses could quickly add up. This can lead to a margin call and a total loss.  

An important step before the start is a Trial on a CapTrader Demo account meaningful. There you can test the performance of the social trading provider in a realistic trading environment without risking your capital. 

Copy Trading - Practical implementation

Copy Trading requires, by definition, a fully automatic version. If, on the other hand, you have to accept and execute each trade manually, this would be mirror trading. 

Some Social investing platforms have specialized in copy trading and offer a "All-inclusive solution". Here you get access to a range of trading templates and benefit from automatic execution. However, the providers are The majority of companies are below average in terms of data protection, security and reliability. In addition, they often horrendous feeswhich are partly hidden in a lower return. 

In practice, it could look like this: You select a trading strategy on the social investing platform that is supposed to earn you 6 percent returns per year. The platform itself appears to be free of charge, as no separate fees are visible. But what you don't see: The actual performance is 9 percent per year; the social trading platform pockets the 3 percent difference. 

In comparison, the Fees with a broker like CapTrader are always clearly visible and significantly lower. Use for example Shares for day tradingYou can trade from as little as $ 0.01 for US shares (order minimum: $ 2.00) or 0.1 percent of the order volume for EU shares (order minimum: € 2.00). It does not matter whether you use social investing or another strategy. 

Special form: Managed accounts

Another Form of investment that works according to a very similar principleare the Managed Accounts from CapTrader. Here, similar to social trading, you choose one of seven available Portfolio managers from. These then trade with your capital. 

Of course, you can see which strategy will be used even before you make your selection. Another advantage: the Capital remains in your possession at all times, in a secure CapTrader account. The selected trader is only given permission to use your money temporarily for the financial transactions described. 

The return then also lands on your CapTrader Depot. As with social investing, there is also ka job for you on. Everything runs automatically via the CapTrader platform.

Managed account combine the advantages of copy trading (Copy the strategy of the professionals; no personal effort) with the reliability and security of a BaFin-controlled broker. CapTrader's low fees also benefit you with this approach and ensure a higher overall return. 

2. mirror trading

The Mirror Trading can be described as a "weakened form" of copy investing. Here, too, you select a social trading template and receive information on its trades. The However, the actual execution is up to you! 

As the Positions Your trade template not automatically adopted you have the final say. For example, you can ignore trades that are too risky or unfavorable from your point of view and only implement the attractive proposals. Trading signals often function in a similar way; the boundaries here are fluid. 

With mirror investing, you retain full control at all times. This social finance variant is therefore particularly suitable for for traders who want to bear less risk or who do not fully trust the signal provider. In return, however, you have to expect a considerable amount of extra work, as the trades have to be executed manually. 

This also creates a time problem. Due to the staggered execution, Mirror Trading rather unsuitable for fast strategies. Wenn Sie also zum Beispiel Earn money with day trading the latency could cause disadvantages. 

There are further advantages if you use your own Improve your trading strategy or financial knowledge want. Since you have to view the positions of your social investing template and implement them manually, an excellent opportunity to analyze and understand them in order to expand your specialist knowledge. 

Mirror Trading - Practical implementation

The use of Mirror trading is simpler and more flexible, as you can receive the trading proposals yourself and implement them as you wish. You are therefore Not tied to a specific broker and can use the cheapest provider with the largest selection. 

The The broker's product catalog should of course match the social trading information you receive. For example, if you subscribe to Mirror Investing Input for a specific options strategy, but your neobroker only offers trading in a handful of stocks and ETFs and no options, implementation is impossible. Admittedly a rather extreme example, but choice can also manifest itself in factors such as available leverage/margin trading or fees. 

3. community trading

Why get input from just one expert when you can get input from hundreds or even interview thousands of people can? At the Community Trading The company relies on swarm intelligence and uses opinions, news and information from the Internet. 

Special Programs search the web and compile the results for you in a clear format. With this variant of social investing, too, you must then open trading positions yourselfto benefit from the results. 

In its simplest form, the software could, for example, query the opinions of thousands of analysts on the oil price and derive a trend. You could then, for example Future Trading on oil - of course, this only works if the predicted price change actually occurs! 

Community investing is not without its flaws and comes with a certain degree of risk. Even if opinions and ideas are shared millions of times on the internet, this is no guarantee that they are correct/the forecasts will come true! As with all forms of social finance Healthy caution and good money management required. 

In addition, such strategies suffer from the The problem is that a prediction cannot come true if it is too obvious. If the community programs detect a trend, all users will learn about it and try to profit from it. This is how a Apparent insider tip quickly became known worldwide. 

As a result, so much capital flows into the respective asset through the social traders that the prices shift and the prophecy can no longer come true. For this reason, some market participants deliberately trade against the recommendations of community finance programs, but this can also lead to considerable problems.

In addition, many community finance approaches ignore the The importance of "smart money". Funds, investment banks and other professional market participants operate according to their own rules, which cannot be captured by the programs. Their Huge influence on market developmentbut remains a black box for private investors and traders. 

Community Trading - Practical implementation

The following are available for implementation Range of social trading platforms that search the Internet for relevant information. Depending on the quality high fees may be incurred. Low-cost or even free providers, on the other hand, are financed by advertisements or trading in users' personal data. 

In contrast to copy and mirror trading, even a Manual search possible! You can search the numerous financial forums, news sites, specialist accounts on social media sites etc. yourself. Undoubtedly a time-consuming process, but also a way to acquire additional knowledge about the financial sector. 

Do you have a Trend identified - whether through our own investigation or a software program - we strongly recommend that this to be confirmed by other sources! For example, you can Day trading charts, Forex Signals or Trading signals/Signal Services to verify your assumptions. 

Conversely, the method can also help to check your trading ideas created elsewhere. Many traders are looking for Confirmation or counter-opinions in forums and groupsbefore they invest their positions. Although they would hardly call it that, it is community trading!

Conclusion: Social trading as an interesting addition to a portfolio

The basic concept of stock exchanges is that a very large number of market participants come together to buy and sell assets. With Social Trading take advantage of this fact and benefit from the know-how of these investors and traders!

Experts share their trading recommendations with users. These can be the trades either automatically (Copy) or manually (mirror). Especially newcomers or market participants who do not want to invest additional time and energy can successfully build up assets in this way. 

The Results can vary greatly - depending on which template is used. Also Losses are possibleso that a thorough examination of the alleged experts and their performance is important. A Test on a CapTrader Demo account is a good opportunity to convince yourself of the quality of these tips in a safe environment. 

With Community Investing is another variant that can be used flexibly to confirm or develop trading positions. Thereby check by a software or personally the Opinions and information from other market participants in forums, social media channels, groups, news sites and more. 

All forms of social trading are theoretically suitable for achieving an attractive return - and often with very little personal effort. One However, they do not guarantee successful tradingso a healthy dose of caution is recommended! 

In addition, the possible results in many cases lag behind other methods back. Even the simple purchase of established companies by a Share savings plan could lead to higher profits in the long term.