Social trading in crypto is a technique that allows a novel or less experienced crypto trader to monitor and copy the trading strategies of an expert crypto trader. By replicating these tactics, the new traders are eased into the complexities of crypto trading.
Usually, crypto newbies find it difficult to figure out charts or grasp different market trends. In contrast, seasoned crypto traders easily interpret all that info and know the right windows to place trade orders.
New traders also copy the risk management tactics and decision-making patterns of experts. An individual new to crypto can begin trading highly volatile assets without the in-depth market knowledge that conventional trading requires.
While it’s mostly beginners implementing this, any trader, even up to an expert level can still carry out social crypto trading.
How Social Trading in Crypto Works
Usually, it works like a social network allowing multiple traders to connect on a common platform and share ideas. Accordingly, novel traders can observe the well-known expert traders’ practices and replicate them.
By examining professional traders’ profiles on such platforms, other traders can view their trading techniques, performance indicators and other metrics. Notably, some of these platforms track the most profitable of these experts based on their records.
Also, some platforms have a feature allowing one to automatically replicate specific transactions. Using this feature, new traders can seamlessly copy the transactions of profitable experts. Interestingly, you can modify the amount you want to trade in this copy feature.
Pros and Cons of Social Trading in Crypto
While this technique reshapes digital-asset investment, it still has some associated downsides.
Pros
Gain knowledge from professionals: Social crypto trading is a great avenue to learn how to trade from the most profitable experts.
Convenience: The technique eliminates the stress of analyzing price charts, market trends and market sentiments before trading.
Minimized Risk: Copying off of the most profitable traders makes it a less risky trading method than trading based on one’s knowledge, particularly for a beginner.
Cons
Extra charges: Some features on some social trading platforms may be monetized. Users who wish to fully explore the packages on these platforms incur additional costs, lowering their profits.
Outcome Variability: The crypto market is highly volatile, and influenced by many factors. So even with the best strategies, the highest-level experts still lose sometimes. Traders who copy off of them in such periods suffer corresponding losses.
Emotional bias and Undue dependence: Blindly following a famous trader may lead to reckless trading. Moreover, over-dependence can ensue, preventing new traders from learning how to make decisions on their own.
In Conclusion
Social trading in crypto is advancing with more features on social platforms and AI Integration. With more sophisticated features, it points to higher profits for users when trading. However, social trading does not upend traditional independent crypto trading.
Disclaimer: The information provided in this article is for informational purposes only and should not be considered financial or investment advice. Cryptocurrency investments are highly speculative and volatile, and prices can fluctuate significantly. Always conduct your research and consult with a qualified financial advisor before making any investment decisions. The author and the platform do not assume responsibility for any losses from investing in cryptocurrencies.