Copy-trading, just as the name implies, involves copying the actions of another trader. When the person opens a trade, you do the same. If the person allocates a certain percent of a stock sector to their portfolio, that is what you do. This means that if they lose money, you also lose your money.
To choose the best trader to follow, find one whose goals and style of investment align with yours. If you are a conservative investor, copy from someone who has a conservative trading bent. Growth investors should make sure they do not copy from someone who is a value investor.
Types of Copy Trading
In your copy trading journey, you may encounter different variants along the way. They include:
– Mirror Trading
This is among the original forms of copy trading. In this form, your positions open and close at the same time as those of other traders. They based it on previously defined trading strategies, auto trading bots, and algorithms. Traders can code specific strategies and trading signals that they will use.
– Copy Trading
Here your positions and the trader’s positions you are copying from open simultaneously. However, you can decide when to close or open the position that will copy from the trader as long as their position is open.
– Social Trading
It goes hand in hand with copy trading. This method allows you to use a broker or a trading platform to interact with fellow traders. Some have features that will enable you to communicate with other traders directly.
Copy-trading differs from traditional trading. In traditional trading, observe the trading graphs and understand the markets to know when to make trading actions and what actions you should make. It may take you months or even years to gain the experience you need. This is not the case with copy trading, where all you have to do is mimic an expert trader’s actions.
Most people prefer copy trading rather than traditional trading because of the following reasons.
– They do not want to get into full-time trading
– They are new to forex
– There is no time to monitor the market for the better part of the day
– Someone else should trade while you collect the prize
What You Need to Know About Copy Trading
– Find a Good Trading Platform
There are many trading platforms available. However, not all of them have the copy trading feature. Do your research on the Best Online Brokers before choosing one to work with. Look for as much information as possible, including its reviews and history, before making the final decision.
– The Risks Involved
When trading forex, the risks you face are still the same when copying from another person. The difference is, you are not the only one who is making those decisions. It is the expert traders who do the risk assessment and the management.
If you want to make more profit, manage your risks. You can do this by optimizing and diversifying your portfolio. Make sure you filter transactions based on risk level so you can manage your risks by picking the best trades.
– People Will Copy from You
An excellent way to learn from the best traders there is through copy trading. The goal is to learn from them and become among the best, not depend on them to make trading decisions. You can develop your strategies, independently manage your portfolio, and others will soon copy your positions. When they do this, some platforms will start paying you. Before you get to this point, your strategies must work with profitable trades and a healthy portfolio.
– It Has a Lot of Benefits
Copy trading is a way to make money and learn about the market at the same time. It does not require you to be hands-on, unlike in social trading. As long as you have good traders to copy, you are okay. Copy trading is also effortless, and there is no need for you to have your virtual server.
Forex is attractive to traders looking to expand their portfolios. As someone with little to no experience in traditional trading, copy trading is the best option for you. The market is easy to enter, and most platforms give bonuses and money-making opportunities for you to get started. Do not go in with the get rich quick mentality. You will end up disappointed. Make sure you stay away from free trade leaders. If their strategies work as well as they want you to think, they would not be giving them away for free.
