Why is Social Trading Less Risky than Fiduciary Management?
Clients apply fiduciary management by handing their assets over to an investment company or a bank.
Maintaining the traditional concept of fiduciary management, the scheme has a significant flaw: there is no decent legal framework, which would regulate the cryptocurrency industry and provide safety of investments.
The investment method requires due diligence and careful risk evaluation since no compensation mechanisms are used.
Another important issue is that you cannot check on the real effectiveness of the traders you are appointed your assets to. You have to believe those who are rather salespersons than traders.
Moreover, you are not in control of your balance and trading stats — now, the fate of your assets is in the hands of other people. As a result, trading turns into a lottery with a slim chance of winning.
Social trading has none of the aforementioned weaknesses.
Firstly, your assets remain at your disposal. No one has access to your wallets on an exchange.
Secondly, thanks to open statistics, you are aware of the professional level of traders and can choose from those whose profitability based on their actions rather than their words.
Thirdly, you can stop and resume copying at any moment. No contracts are needed. The interaction is enforced by a simple API-interface due to which you remain control of your assets.
And finally, you can keep track of the amount of income in your wallet, evaluating the efficiency of copy trading in real-time.
Social trading platforms receive the commission fee charged for copying a successful deal; therefore, they are interested in the traders’ success.
Social trading is a technological, transparent, and safe type of investment requiring neither special knowledge nor analysis of companies whose data integrity can be verified only first hand, which can sometimes be painful.