Platforms like eToro allow traders to leverage the expertise of the community to improve decision making, portfolio construction, and asset allocation. Each decision being propagated to you in real-time.

Now, this process certainly sounds similar to signal groups. Except everything is automated for you.

Instead of relying on manual processes to trade, allocate your portfolio, and follow the latest market trends, leaders can instantly adjust their portfolio and let your portfolio follow along.

There are two major areas where social trading truly shines.

Copy Trading

Copy trading is a precise action where a leader places a trade on an exchange which is thereby copied by all of their followers. Since the trade is copied, this can provide a long list of complexities for volatile markets like cryptocurrency.

As the price of assets fluctuate, it’s difficult to consistently place orders for a group of followers if their volume is significant. There are chances they will move the market, miss the opportunity, or get left behind.

Each missed opportunity racks up the inconsistencies between your portfolio and the portfolio of the leader. Eventually, you can be left in shambles if the trading system is not designed to properly handle missed trade execution opportunities.

Social Portfolios

Social portfolios are a simplified portfolio management option. While taking inspiration from copy trading, social portfolios are managed through allocation percentages.

Rather than worrying about the precision with each individual trade, social portfolios focus on the precision of maintaining a portfolio in accordance with the percent allocations designated by the leader.

This allows a leader to change allocation percentages at any time and propagate those changes to the followers. These followers will then be able to instantly rebalance their portfolio to match the allocations and strategy of the leader.

Instead of running into issues with order execution, social portfolios concern themselves less with each individual trade - so no follower is left behind.

While there are concerns with market impact when performing copy trading, these concerns are mitigated by social portfolios since the individual trades can differ between traders.

For example, trades can be routed through alternative trading pairs to always perform the best possible execution path as well as reduce the impact on any individual trading pair.

This opens up the possibility for thousands of users to follow the same leader and execute the same strategy without having substantial impact on the market.

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