Crypto Social Trading: The Key To Trading Like Experts

Crypto social trading is a disruptive phenomenon that’s making ordinary investors think big in terms of consistent and profitable trades. Now, anyone can join the trading frenzy by learning from expert traders and following their unique investment strategies.

You can forget the disclaimers claiming that more than 70% of traders lose money while trading. Instead, the combination of crypto trading and social trading offers traders the hope of becoming consistently profitable without the inherent psychological fear of the markets.

In this article, you’ll learn how you can trade like experts by learning the strategies of expert traders, replicating their trades, and automating the system to control your portfolio.

What Is Crypto Social Trading?

Crypto Social Trading is a type of investment which allows traders to learn from experts and copy the trading strategies of experienced crypto traders.

It’s quite different from regular crypto trading. Under traditional circumstances, you would open an account with a crypto exchange to trade various types of cryptocurrencies. To make successful trades, you would rely on financial news as well as technical indicators to trade the crypto market.

While this is the most common method of trading financial instruments, it's risky. Most traders lose in the long run because they're unable to cope with the mindset needed to bag consistent profits.

If you have a lot of money at your disposal, one way to circumvent the risk is to invest in a hedge fund. However, doing so doesn’t usually produce the consistent monthly returns that most traders crave.

One answer to these problems is social trading.

Social trading allows you to replicate trades of experienced traders in your account, and enjoy the high returns associated with intraday and day trading. You don't need to be a millionaire to participate, because crypto trading platforms allow users to invest as little as $1. Overall, anyone can participate — in a transparent environment with little or no restriction.

How Does Crypto Social Trading Work?

Several crypto social trading platforms have popped up in recent years, offering their services to the general public. While the dynamics of each social trading platform differ, the underlying concept is the same: Let investors copy the trading patterns of more experienced traders.

The account creation process is almost identical in each case. To start copying trades, you’ll need to open an account on your favorite crypto social trading platform. The setup generally requires filling in basic details. Sharing such credentials with the platform offers access to the in-depth trading history and performance charts of expert traders. You may also use social media or your Gmail account for quick access.

Some social trading platforms also allow users to view the performance of individual experts without creating an account; however, such stats are mostly limited in scope, and the stats usually don’t provide a detailed analysis of trading performance. Therefore, it's highly recommended that you create a free account so you can evaluate the platform and its expert traders before trading with real money.

Learning From Expert Traders

So, who are these expert traders, anyway?

Expert traders are individuals who are usually very confident in their abilities to trade crypto and other financial instruments. Anyone can become an expert trader by participating in the specific program offered by the respective social trading platforms. A person intending to become an expert must show consistent and profitable trading performance.

For your part, you can follow multiple expert traders at a time after reviewing their trade history, risk-reward ratio, ROI indicator and other parameters. Based on the business model of the platform, you can either trade cryptos directly on the platform, or you may need to connect your existing crypto account using an automated API.

From the perspective of the trading community, it's a win-win situation for both the crypto trader and the crypto social trading platform. It allows crypto traders to automatically execute trades of more than one veteran trader in their trading account. On the other hand, the social trading platform can increase its revenue by charging a service fee to each user.

To better understand different types of crypto social trading platforms in the market, here’s an overview of how they serve their customers.

Volume-Based

Social trading platforms such as eToro and Zulutrade don’t charge any kind of fee for replicating the trades of experienced traders. Instead, these platforms mostly receive compensation from the bid/ask spread whenever a trade is initiated in your account. In other words, it means that you don’t need to pay any kind of fee to follow the expert trader.

Fee-Based

Some platforms charge a small fee to support their business model. For instance, NAGA charges $0.99 per trade and a 5% commission on profitable trades above $10. There’s no doubt that NAGA has a very good reputation in the industry, but it may not suit investors who are looking to trade very small amounts. In this case, you're likely to lose more than you can gain.

Subscription-Based

Coinmatics and Collective2 are examples of well-established platforms that rely on subscriptions. As an investor, you’ll need to subscribe to one of their plans to access relevant features. In return, you're not charged any kind of fee to copy trades.

The type of subscription model can also differ. For instance, Coinmatics charges anywhere from $0 to $25 to copy experts, and you can copy multiple strategies. In contrast, Collective 2 lets experts decide how much they want to charge for their strategies.

Hybrid

Tradelize, a relatively new social trading platform, is an example of a hybrid business model. Unlike other subscription-based services, their free plan covers all the basic services. However, professional and institutional customers are charged extra for using advanced features.

Of course, these aren’t the only types of service models used by crypto social trading platforms. You’ll find all sorts of systems in the market, including performance-based and profit-sharing models.

Irrespective of the fees, it's important to understand that service fees are only one part of the equation. However, the quality of the expert traders on the platform is the real key to successful social trading.

Pros and Cons of Crypto Social Trading

Social trading has changed the dynamics of financial trading. Once dominated by hedge fund managers, the contemporary trading landscape is influenced by expert traders, automated systems and cryptocurrencies. If you're still undecided, take a look at the following advantages and drawbacks of social trading. It will help you decide if social trading is worth the hype.

Pros

Minimum Learning Curve 

Crypto social trading lets you generate positive ROI regardless of your knowledge of financial markets. Automation also offers a psychological boost so you can continue earning without worrying about the existing sentiments and market conditions.

Time Management 

Crypto social trading saves time and energy by letting others trade for you. There’s no need to sit in front of the trading terminal, managing trades. Modern crypto social trading platforms offer advanced control panels so you can automatically set a risk profile to take advantage of existing trends.

Trading Education

Crypto social trading is a great tool for learning new trading techniques and strategies. If you've spent some time trading financial instruments, looking at the trade history of an expert trader can reveal important information about their strategies, and how they control risk.

Enhanced Transparency

Crypto social trading is transparent. Unlike hedge funds, signal provider services and copy trading, reputable crypto social trading platforms offer in-depth information on each trade. As a result, it’s almost impossible to manipulate performance data.

Portfolio Diversification

Crypto social trading enables you to diversify your investments. You can easily select multiple signal providers, and adjust the parameters according to your desired risk appetite. Most platforms let you invest simultaneously in stocks, forex (or FX) and other financial instruments.

Cons

Less Control

Crypto social trading doesn't give you full control over your trading decisions because you’re mainly relying on the experience of other traders to succeed. Unless you’ve created a risk profile for your expert traders, you can potentially lose a lot of your capital if things go wrong.

Performance Manipulation

Crypto social trading performance charts can be adapted to suit an expert trader. For instance, the lack of data on drawdowns can often lead to a false sense of security. A drawdown refers to a reduction in the existing capital when the trading account is down from the peak, before it recovers. Therefore, it's critical to analyze drawdowns instead of simply looking at the performance chart.

Higher Budget

Crypto social trading may require a higher budget. Depending on the crypto copy trading platform, the initial investment to open an account can be much higher than what you’re intending to invest.

More Complicated

Crypto social trading often requires a little bit of a learning curve. Since every crypto social trading platform has its own rules, control panels and fees, it can take some time to adjust to the environment. In this scenario, try to do a demo trade before going full-steam with real money.

Crypto Social Trading vs. Crypto Copy Trading

The terms “social trading” and copy trading are often used interchangeably. Since many of these concepts are new, it won’t be an overstatement to suggest that the internet is full of incorrect definitions and concepts regarding the differences between the two.

People generally think that copy trading means copying other traders, and social trading refers to following the trading mindset of the social trading community. However, these explanations barely reflect ground realities as they pertain to modern crypto social trading platforms. Experienced social traders know that googling the internet just adds to the confusion.

What Is Copy Trading?

Copy trading is simply a part of the much larger social trading phenomenon. The concept of copy trading evolved from the early days of online trading, when people could get trade signals on their mobiles. The signal provider would send notifications to followers who subscribed to their service.

As technology improved, signal providers started delivering services in the form of copy trading. Well-established copy trading platforms allowed such signal providers to use their platforms to generate signals, which could be copied by thousands of people automatically without relying on text notifications. Mirror Trader, established in 2005, was the first platform to offer copy trading services. Using the platform, you could easily copy the trading signal of an expert trader.

Transition to Social Trading

Just a few years later, eToro enhanced the concept of copy trading by introducing a true social trading platform. Instead of simply allowing the person to copy a trader, it offered users greater control of their trades by introducing a control panel where they could define risk parameters.

Benefiting from the technology, anyone could tell the system to stop the trade if it went against their risk-taking appetite, similar to setting stop-loss and take-profit, irrespective of the strategy.

Another important concept, which closely relates to the definition of social trading, is the introduction of a variety of financial instruments for everyone to trade. Instead of copying experts, modern social trading cryptocurrency platforms let users trade assets just as they would do using a broker.

In essence, traders can communicate with the social trading community of a particular platform, and take positions independent of the positions generated in their portfolio by trading experts. To save time and make better decisions, they can also follow the portfolios of their fellow traders, or change the share of a specific asset in their portfolio.

All of these features make social trading a truly “social” phenomenon whereby everyone can benefit from the combined knowledge of the entire community. The concept is different from pure copy trading, where only the expert trader is in charge of the decision-making process.

Best Crypto Social Trading Platforms

Here are our top 10 picks for the best crypto social training platforms based on popularity, regulatory affairs, customer reviews and platform features. In keeping with our quality guidelines, we've tried to include a variety of popular service models without excluding top crypto social trading platforms. Enjoy!

Zulutrade

Founded in 2007, Zulutrade is among the largest and most well-known social trading platforms. The company is headquartered in Greece and executes billions of dollars in trading volume annually.

A good number of experts trade only cryptos on the platform. Copy trading is free of cost, but the minimum amount to create an account is $100. Zulutrade partners with more than 30 brokers, so you can connect your account to copy trades executed by experts.

The major drawback is the limited number of cryptocurrencies that you can trade. At the time of writing, there are only 13 cryptocurrencies offered. 

eToro

As one of the first crypto trading platforms, eToro has evolved into a multimillion dollar company that has offices on five continents. The social trading platform is regulated by FCA (UK) and CySec (Cyprus).

According to the official website, the 50 most copied expert traders on eToro generated an average of 30.4% return in 2021. You can trade almost 60 cryptocurrencies, and there’s no fee to copy crypto traders. Due to strict performance criteria, you’ll likely find multiple successful crypto traders who have a solid performance history.

On the downside, investors need to invest at least $200 before trading with real money. Similarly, customer support lags behind that of some of the other well-known platforms.

NAGA

Naga Group AG is a German publicly listed fintech company. Since its inception in 2015, it has transformed into the largest crypto-only social trading platform. Depending on your choice, you can either trade cryptos or participate in the social trading platform, NAGA.

Based on the stats, the company claims that its top 10 expert traders consistently deliver more than an 85% win-loss ratio. The platform has a large number of traders to follow. To initiate trading, you only need to deposit €10. Accordingly, the platform supports all major credit cards and a variety of global payment methods.

The main drawback is its fee. You're charged €0.99 per trade and a 5% commission on profitable trades above €10. Due to international regulations, the service is not available in the USA and UK.

Coinmatics

You can either subscribe to a trading strategy by paying the subscription fee or get trading signals on your phone. The platform offers a proprietary rating system for each signal provider that lets users filter strategies according to the user's risk appetite. Regardless of the fee, you’ll need at least $50 to start trading.

Coinmatics relies mainly on a system of copy trades. As a result, the number of social tools is quite limited. At this time, the supported exchanges are Bybit, Binance, OKX, and FTX.

Tradelize

Connecting the broker account with Tradelize ensures that everyone in the Tradelize ecosystem can see your trading history. Once the history is imported to the Tradelize platform, the system automatically assigns the user a rating.

Members of the community can learn and chat with you to learn about your trading style. They can also request that you carry out trades for them. For this purpose, Tradelize offers mirror trading, with you can build a trade history to get followers.

Despite the free account, professional traders need to pay a fee to receive additional perks. Since it's a relatively new platform, there aren't yet enough reviews to gauge the popularity of this new social trading cryptocurrency model.

3Commas

Established in 2017, 3Commas is a well-established Estonian company that offers innovative automated crypto trading bots. You can connect its feature-rich trading terminal to more than 18 crypto exchanges.

To use these features, subscribe to either free or paid plans. Once connected, you can create your automated crypto trading bot from a variety of automated strategies available on 3Commas. Anyone, irrespective of their trading experience, can create and set automated trade parameters for their trades. If needed, you can also replicate a trading portfolio of one of your peers.

The main drawback of 3Commas is the slight learning curve associated with setting up bots. While it's easy for some to do, others have more difficulty. In addition, at the time of writing, there’s no desktop application for 3Commas, which can deter some seasoned traders from joining the community.

Shrimpy

This has changed in the last few years as Shrimpy introduced multiple social trading tools to enhance its offerings. For instance, it claims to offer one of the most comprehensive sets of market data to backtest trading strategies.

Similarly, you can automate a strategy based on the portfolios of investment funds like Coinbase Ventures, Blockchain Capital or Binance Labs. In addition, you can copy expert traders in order to mimic their performance.

While Shrimpy offers a feature-rich experience, there aren't that many expert traders to copy. The absence of a free plan may also put off some users.

Zignaly

There is no fee to join the platform. Besides the profit-sharing model, you can also participate in strategies that include crypto trading bots, crypto copy trading and crypto signals. The clean interface, transparent stats and open access make Zignaly one to watch for in the future.

As of this writing, the platform only supports four major crypto exchanges: Binance, KuCoin, AscendEX and BitMEX. Despite the upbeat theme, the team operating Zignaly still needs to work on building and improving their social community.

Pionex

Creating an account on Pionex allows users to trade major cryptocurrencies, with sixteen auto-trading bots to streamline your trading 24/7. The platform offers almost 350 tokens, with only a 0.05% trading fee.

Pionex doesn't have many social trading tools at its disposal. It can't be classified as a true social trading platform, but its intuitive model is enough to put it on this list.

Cryptohopper

The model operates on the assumption that bots can outperform humans in the long run. In line with this theory, Cryptohopper offers the largest number of automated strategies in the industry, which can be used on 10 leading crypto exchanges. In addition, you can also try the traditional social trading setup, or create your strategies using an easy-to-use strategy designer. There is a subscription fee to try out all these features.

Despite a feature-rich platform, the subscription price is relatively expensive compared to similar models. The lack of in-depth information about the bots is yet another setback.

Is Crypto Social Trading Worth Trying?

The concept of crypto social trading is very new compared to traditional trading models.

One reason to try crypto social trading is that institutions and millionaires have consistently relied on similar models to rack up profits through hedge funds. It's only now that technology has allowed everyone to join the party.

The social aspect of crypto trading also lets individuals learn from others. Social signals generated by the community are similar to "insider news" that can propel hordes of people to get in on the trade at the right moment.

Apart from these similarities, there are many reasons why crypto social trading makes a lot of sense. Unlike hedge funds and other methods of investment, it’s transparent, enables everyone to participate, and allows individuals to actively control their investment portfolio while learning from expert traders.

The Bottom Line

Experts are already talking about social trading replacing other forms of investment. Due to the flexibility and control, the model is a natural successor to traditional investment strategies. If you're still hesitant, try a demo account to get an idea of the endless possibilities that crypto social trading platforms can offer.