Published by Steven Hatzakis. Tuesday, April 4th, Online social networks such as Facebook and LinkedIn have fundamentally changed the way people socialize and interact on and off the internet. The financial trading world is no exception, and the rise of social trading — also known as copy trading, mirror trading, or auto trading — has been ongoing for over a decade. The idea is simple: Without social trading technology, the act of copy trading would be considered a managed account and require a power of attorney.
However, thanks to careful language and ever evolving technology, many regulators consider social trading self-directed as the client must decide who to copy. Many of the early pioneers in social trading technology started out first as third-party platform developers, such as Tradency, ZuluTrade, and eToro. While some of these firms are still independent service providers ISPs , eToro became its own broker, for example.
From the 20 international forex brokers we reviewed for copy trading, eToro is our top pick for as it has continued to innovate with the latest launch of its next generation eToro platform, which delivers an impressive user experience packed in a modern web-based user interface. Overall, the eToro experience sets the bar high for social trading and is the clear winner, leading the industry forward as a broker that is almost exclusively focused on social copy trading.
All in all, Pepperstone leads the field with one of the widest ranges of third-party social trading platforms available, even though it has not created any such technology of its own, and provides traders a diverse range of options.
City Index followed with its Connect platform for social trading. Understanding how social networks calculate trading performance is an important aspect as it will affect the ordering of trader rankings. The method used to measure and track profit and loss will also influence trade copiers. Instant backfill bias is just one example of the challenges social trading technology developers face if they permit traders to instantly upload their entire trading history with the click of a button.
While such challenges have been known for years, and thanks to procedures put in place by firms, as well as following regulatory requirements, forex traders have access to reputable forex brokers and robust tools to conduct copy trading.