For those who do not want to delve into the essence of independent trading, there are transaction copying systems. You can copy trades of successful traders to your own account, partially or completely, which will save you from fear and the need to trade on your own. Copying of transactions is carried out for a percentage of your profit from copied transactions, which are established by those traders whose trade you intend to duplicate.
How it works. Social trading (or LAMM accounts, lot allocation module) is a service for copying transactions in volumes proportional to the money of the trader and investor. It works as follows:
- The investor attaches his account to the account of the trader whose transactions will be automatically copied. If in the case of PAMM accounts the trader sees the number of investor accounts and their number, then in the case of social trading this information remains closed.
- All open and closed transactions in the trader’s account are copied to the investor’s account.
There are three main trading options for LAMM accounts:
- Directly the service of the broker. If such a technical possibility is provided. For example, LiteForex has it.
- ZuluTrade. An independent transaction copying platform that unites more than a dozen brokers and their traders.
- Copying signals from the MT4 developer. This is a platform that partly resembles the principle of ZuluTrade. There are also traders here, to whom you can connect and copy transactions in automatic mode. The advantage of the platform is that it has a much more convenient ranking. Traders are divided into groups according to maximum profit, reliability, availability of feedback, leverage, maximum deposit, type of trade (manual or automatic), etc. Within each trader is a convenient grouping of all information on the account: statistics, slippage, mathematical risk analysis, etc. A subscription to signals is available on the MQL5 website.
Each of these three most common options has its pros and cons. For example, social trading from an individual broker loses to the sites by the number of accounts to connect (which is logical, since the platforms unite the traders of several brokers). ZuluTrade is a specialized platform tailored specifically for social trading, there are a lot of interesting tools and a multinational chat (including discussion of each trader). But the start here is from 300 dollars. the USA.
MQL5 is a platform that unites everyone who has at least minimal (even indirect) relevance to trading or developing trading products. Copying signals here is one of the dozen features of the platform, and the approach to the technical organization of the process itself is thorough. If you believe the reviews about ZuluTrade, there are often problems with slippage and crashes when copying. There are practically no complaints about the speed of MQL5 data processing.
Despite the visible advantages of the platforms, they have one serious drawback – the reliability of the traders themselves who act as signal providers. Platforms are organizational intermediaries and do not own the tools and the ability to track problematic schemes (or own, but are not in a hurry to do this). Examples of the most common platforms for problem situations:
- Using strategies with the use of Martingale, averaging, outsourcing and other high-risk tactics that show immediate income and obviously unprofitable in the future.
- Trading on demo accounts, fake trading statistics.
- Technical problems with transactions, where it is difficult to understand the degree of responsibility of the broker and the platform itself.
And here social trading from a broker gets some advantages. The company makes money on the spread and is therefore interested in the trading performance of its customers. The reputation of traders is the reputation of the broker himself, who controls the rating, clearing it of obviously unprofitable and fraudulent schemes. The probability of loss when copying signals is still preserved, but thanks to strict control, the risk of losing money and getting into scammers is reduced. Accordingly, the problems inherent in the platforms and indicated in the list above are leveled.
From theory to practice. In order to connect to the signal copying service, in any case, you will have to open an account with a broker, replenish the deposit and pass verification. This procedure is required, even if the copying of signals is assumed using the platform service. Further, the registration procedure for different platforms differs:
- ZuluTrade. Here, after opening an account, you need to send to the platform the details and number of the account opened with a broker. Then the contract with the site is drawn up, which takes 1-3 days. The agreement is an agreement in which the investor agrees that the data from the platform will be sent to the investor’s broker. It is impossible to refuse to sign the agreement and re-verify (I note that you will have to provide ZuluTrade with personal data), since on the basis of this agreement the platform receives a commission from the broker and ZuluTrade itself turns into an introducing (IB) broker for the investor. Then, in the personal account of the platform itself (it is not necessary to control the broker’s personal account), the investor selects the traders he is interested in and starts trading. Yes, everything is complicated.
- MQL5. Here the scheme is somewhat different and partly simpler. The subscription is issued not on the site (platform) itself, but on the MT4 / MT5 terminal, where the signal copying service is already integrated into the platform. True, in addition to the terminal itself, you will also need an account in the MQL5.community community. After registering an account and depositing money that will be paid to the community for copying signals (ZuluTrade does not have a commission), in MT4 / MT5 in the Settings / Community section you must specify the account address. Now you can connect to transactions at least from the terminal, at least from your account.
Social trading with a broker is much easier. Here you do not need to enter personal data on any third-party resources, you do not need to pay a fee for copying transactions of an individual trader (as in MQL5). In the trader’s personal account, available after registration, there is a “Copy” button.
After going to the menu, a list of traders will appear, which can be sorted by profitability and risk. Moreover, the investor is warned about the risks separately. Here you can also see the chart of the trader’s profitability for different periods, the number of transactions and other statistics, including the number of subscribers to the signals. Everyone who wants to make sure that he is dealing with a real trader can contact him in an online chat.
Thus, we can name another advantage of social trading with a broker in comparison with platforms – the simplicity of the operation itself. Copying transactions can be done in a few clicks, you do not need to spray on several services, controlling the main account in one terminal with one broker. Read more about social trading.
Pros. For the investor, this is an option of passive earnings without the risk that the trader will use his money.
Cons. The risks are the same as in PAMM accounts: there is no guarantee of profit. It remains likely that the rating of traders of a broker working according to the B-Book scheme is fictitious. Also, automatic copying does not remove from the trader the need to monitor the account and evaluate the correctness of the signal.