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Comparison of the best social trading providers 2022

Forex trading is more popular today than trading stocks because of the faster price movements. However, many investors shy away from investing in this market due to a lack of experience. With social trading, however, you can simply copy the trades of the most successful traders and invest your money without any special knowledge.

In our test,eToro als die beste Social Trading Plattform herausgestellt. Grund dafür war die sehr gute Kombination aus Handelsangebot, Bonus, Demokonto und einsteigerfreundlicher Bedienung.

Find out more about social trading now or choose your platform from our top 4 directly!

To the test report Currently no bonus offer To the page
To the test report 10% bis 25% bis 2,500CAD/EUR/USD To the page

That's behind the term Social Trading

Selection of a provider

When choosing your social trading platform, pay attention to the following points to find the best provider. Choosing the right platform is decisive for long-term success in copy trading.

Important criteria

  • Performance & transparency of the offers
  • Selection – how many traders are there?
  • Bonus – additional trading capital

Social trading is part of a development that now affects many areas of our lives and can be summarized under the keyword Web 2.0. For example, relationships between companies and customers are no longer conceived as one-dimensional from company to customer, but increasingly as an interactive exchange. This development can also be seen in the area of ​​investment and financial advice. While it was completely natural until about ten years ago that questions about the right financial investment were primarily discussed with a customer advisor from the bank, the potential investor now has many other sources of information and, above all, exchange options at his disposal thanks to the possibilities of the Internet. As a result, the knowledge base available to individual investors with just a few clicks has expanded significantly. As much as this wealth of information is to be welcomed, the challenge for the investor to filter out the right strategy from this sea of ​​information, knowledge and opportunities is just as clear. This is exactly where the idea of ​​social trading comes in. Instead of paid advisors who are dependent on the respective institutions, this principle ideally relies primarily on the intelligence of all investors.

One initial thought is that all investors can in principle potentially benefit from each other with their individual strategy. Basically, two groups of investors meet here. On the one hand there are the more experienced, sometimes also professional investors who are looking for followers with their respective strategy. While the first group refers to top traders or so-called signalers, passive investors are followers. On the other hand, there are simple investors who are looking for suitable patterns and strategies to orient themselves on. Both sides find each other on platforms on the Internet. In addition to the function of bringing top traders and followers together, many social trading providers also see themselves as communication platforms. This means that investors can discuss with each other or with top traders. In the meantime, a whole series of different providers, each with a specific focus, has established itself. We explain what is important when choosing the right provider and what else needs to be considered in relation to social trading.

Background information - what is important in social trading?

Before going into individual specific facets of social trading, the basic principles and mechanisms should be explained at this point, which the investor in each Fall should know if he wants to get into this segment.

The principle of social trading

In order to visualize the principle of social trading, it helps first to look at the To orient funds. Ultimately, a financial institution publishes an investment portfolio in which investors can participate if it suits their needs. Regular investment funds are actively managed, i.e. the fund manager(s) continually restructure the composition of the values ​​bundled in the fund according to their assessment of the market situation. The fund management charges a fee for this active management, which is deducted from the actual performance of the fund. However, it often turns out that the performance of funds lags behind the market development, i.e. the development of individual indices. This gives rise to the justified question of whether it makes sense to invest in an investment fund. A serious alternative to investing in a fund is social trading. Here, successful investors also become fund managers that other investors can use as a guide. It is no longer just simple private investors who act as signallers. Renowned business newspapers and seasoned financial market experts now also offer their own portfolios. Compared to investment funds, this form of passive investment is significantly cheaper for the follower because there are fewer fees. However, this form is not free of charge. In addition to fees, albeit significantly lower, fees may also be charged on the performance achieved.

Social trading comes in different forms and facets

There are ways to participate in social trading for the simple investor several ways to become a follower. This depends on the one hand on the provider but also on personal preferences. In the simplest version, the follower only follows the information and activities of the signal provider(s) he or she has chosen and reproduces them in their own portfolio. This strategy is the most non-binding and the simplest, but it also has its pitfalls. In particular, it is not always possible to choose the same denomination of shares as the signal provider, since trading usually does not use identical budgets. In addition, there is inevitably a time lag, so that small price differences between the buy signal and the reaction of the follower can ensure that the portfolios of the signal provider and the follower do not develop identically. Even if this simple form of replicating certain patterns of action is considered to be the original form of social trading, it hardly plays a role nowadays

In contrast, so-called automatic trading, also known as mirror trading or copy trading, is much more widespread . Here, the follower's trading strategy is fully linked to the activities of the top trader. This can happen in different ways. In this context, some providers, such as ZuluTrade or wikifolio, act as pure platforms that bring the two groups of investors together, but do not offer any custody account management themselves. The follower must therefore have a separate depot through which the transactions are carried out. A connection is then established between the signal provider and the follower's depot via an agreement between the custodian bank, the social trading platform and the investor. In principle, the investor no longer has to worry about anything. In addition, there are also a number of providers in the field of social trading who also offer their customers custody account management, i.e. manage the money or financial products themselves. One of these providers is ayondo.

Providers such as wikifolio go one step further. In addition to the option of automatically copying strategies, if there is a corresponding demand, wikifolio also issues certificates that map the portfolio of a top trader and also track their restructuring. The certificates are issued jointly with Bankhaus Lang und Schwarz and can therefore be freely traded on the stock exchange. The investor can understand the success of the top trader's investment strategy based on the course of the price of the respective certificate, since these are issued at an original issue price of EUR 100 as standard. In contrast to the classic copy-trading variant, only the certificate is in the depot and not the individual values. This initially saves a lot of transaction fees. A disadvantage, however, is the so-called issuer risk, which is always at the expense of the current owner in the case of a bearer bond. In concrete terms, this means that the investor who has the certificate in his custody account will be left empty-handed in the event of the issuer's insolvency.

What else is there to consider?

Basically, the same rules apply to social trading as to investing in general. On the one hand, this means that high opportunities are synonymous with high risk. This results in some special features in relation to social trading. In principle, the investor can initially assume that a risk-minimising diversification is already present in the respective strategies. While this is correct, there are massive differences between the individual top traders in terms of their risk appetite, which the investor should deal with as closely as possible. In addition to broad and conservative strategies, which are primarily aimed at sustainable and long-term performance, there are also a large number of top traders with highly speculative strategies. In addition to the share, all other possible financial products can also be used. Individual trading platforms from the field of social trading have specialized in certain market segments. While wikifolio traditionally relies on stocks, funds and indices, ZuluTrade has focused on highly speculative forex trading. The provider ayondo, on the other hand, occupies the field of CFDs in the field of social trading.

All in all, the entire investment spectrum is also possible in social trading. Anyone who gets into social trading should first be clear about their risk appetite and preferred trading strategy in order to choose the right provider.

How does the investor recognize effective and reputable social trading platforms

Basically, one can assume that the well-known platforms act seriously. At least no case of fraud or rip-off has become known in the field of social trading. However, the risks for the investor are on a completely different level. Since most companies in the social trading segment see themselves more as a platform anyway and have nothing to do with the specific management of customer money, the responsibility for the deposits in most cases lies with the custodian bank anyway. The central competence of the social trading platforms, which is decisive for the investment, lies in the support in selecting the right top trader or traders. Here, too, the providers pursue different philosophies. For example, wikifolio has strived for an extremely balanced search function that enables customers to find the top trader that suits them based on a wide variety of parameters. On the other hand, speculatively oriented providers rely primarily on the return achieved in a certain phase as a key selection criterion and thus give the impression that such a return can also be expected in the future. However, it is taken for granted among experts that such a conclusion is inadmissible, especially when trading in speculative products. Quite a few experts also see this type of social trading as a form of gambling. Some platforms also deal with the level of the actual risk rather marginally and, above all, focus on the enormous chances of winning. However, investors should also know that the providers in social trading are not subject to any controls and are therefore largely free in their risk appetite. Even if the platforms have formulated regulations and use the community as a control body, you are never immune to nasty surprises.

The most important principle should therefore always be to deal with the respective risk and to adjust the trading budget to be used accordingly. Any products are quite suitable as an exciting admixture. However, whether investors should entrust a large part of their money to a highly speculative top trader is by no means to be recommended in view of the dream returns achieved in the past.

For whom is social trading worthwhile

Bei allen Risiken, die es im Social Trading gibt, sollte man diese Handelsform aber letztendlich als das Betrachten was sie durchaus ist: Eine ernstzunehmende Alternative zu klassischen Finanzprodukten wie Fonds oder ETFs. Aufgrund der fehlenden Kontrolle und der erhöhten Komplexität dieses Handelskonzeptes ist es aber vor allem für fortgeschrittene Händler zu empfehlen, die sich bereits mit Begriffen wie Strategie und Risikodiversifikation in Bezug auf die eigene Finanzanlage auseinander gesetzt haben. Grundvoraussetzung für einen erfolgreichen Handel ist nämlich zunächst, dass man die Strategie des Top-Traders versteht und dem entsprechend auswählt.

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Even if an intensive exchange is not mandatory, this is definitely desired due to the communicative aspect of social trading. In addition to the pure connection between top traders and followers, many platforms also provide communication options in the form of forums and online chats. In it, the players can exchange views on technical financial market issues. However, in order to be able to have a say here and to draw corresponding conclusions for your own strategy, prior knowledge is required.

Conclusion - Social Trading as a good alternative for advanced users

Social Trading is becoming more and more popular establish or expand as an integral part of the financial investment. However, it is not suitable for a mass model because it is linked to certain requirements. This includes, in particular, a certain prior education of the investor in order to be able to assess trading strategies beyond the mere number of returns. It is particularly interesting for investors who do not feel attracted by the conventional offers, but who, due to their living situation, do not have enough time resources for active trading around the clock. The possibility of following one or more top traders offers interesting and, above all, cost-effective alternatives. However, the basic principles of the financial market cannot be overturned with social trading either.

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