What to do if you’ve decided to try your hand at trading to earn some money on Forex or other financial markets for your future and short-term financial targets? If you want to learn more and develop your skills in trading, you can read the cryptocurrency beginners guide or take free courses that are offered online. This is where copy trading can come in handy. Before you decide to copy trade, let us explain to you all the specs so that you can benefit from this system the most.
Short Intro to Copy Trading
Copy trading is a kind of portfolio management that allows you to copy positions opened and operated by a more skilled trader. When a copied investor performs any trading activity, such as opening or closing a position, assigning “take profit” or “stop-loss” orders, these actions are automatically executed in your account. It is based on the proportion between the account of a followed investor and your designated copy trading funds. This way, you have the same positions as the investor you are emulating, improve your track record, and avoid costly mistakes.
Bilateral Benefits from Copy Trading
This system is beneficial for both parties:
- You, as a trader or a signal follower, can monitor trading strategies of other successful investors, diversify your portfolio, and enter into stocks and trading markets without making pricey mistakes;
- In their turn, signal providers or leaders you choose often receive compensation in the form of monthly subscription fees on your behalf. Moreover, popular investors can gain a 100% spread rebate for their transactions.
Therefore, other traders are stimulated to allow you to copy their trades rather than trading privately. If you find a successful trader to follow, the strategy can result in high profits. However, this system implies certain market risks, and you should remember that results in the past don’t guarantee future returns.
How to Copy Trade Another Investor?
There are different ways to follow other expert traders:
- copy all the transactions of a selected investor, such as take-profit, trade-entry, and stop-loss orders;
- get notifications of transactions and copy these trades manually;
- emulate traders specialized on different financial instruments, like a commodity investor or a forex trader;
- follow investors that use various time frames, such as a long-term position trader on the stock market or a short-term intraday trader.
Besides, you may choose several traders to copy to find the best way to make money in the financial markets.
Similar Terms, Different Meaning
You shouldn’t confuse this method with mirror trading. Copy trading took its roots from mirror trading in 2005. While the latter approach enables you to copy particular strategies, copy trading links a number of your funds to the account of the copied investor. If you don’t have enough time to follow the markets by yourself, copy trading can be an option to consider since it is focused on short-term trading.
Is It Worth the Efforts?
By employing this method, you still preserve the freedom to disconnect copied trades and manage them on your own. Also, you may close the copy relationship at once, and all copied positions at the ongoing market price will be automatically closed. You can follow another investor and gain essential knowledge and trading skills before you decide to risk real capital. Since copy trading comes with a lot of advantages, don’t hesitate to choose the right platform that will help you diversify your money and succeed.