Forex trading is one of the most popular platforms for retail traders, who are looking to expand their portfolio. There are many opportunities for moneymaking in the market. Currently, enter into the forex trading is easy since there are methods like copy trading, Expert Advisors, Indicators, and social trading. In this article, we are going to discuss copy trading.
- Learn more About Forex Expert Advisors (Forex Robots) – HERE
What is Copy Trading?
You can directly copy the positions which have taken by other traders and connect a part of your portfolio with theirs. When you link your portfolio with other traders, you may copy all of their current positions of the market and any action they make thereafter automatically. When you start copy trading, your account acts simultaneously as per the traders. Such as, if other traders open a new trade, you also open a new one, and if they close a trade, you also close. When it comes to profits, if other traders win, you also win, but unfortunately, if they lose, you also lose. But there is a flexible option to control the outcome.
In many platforms, you can close the trades when you start connections and open new ones.
Benefits of Copy Trading
The Copy-trading feature does not allow from every platform, and not all brokers support this function. Some top brokers, who take this seriously, allow customers to have benefited from it. There are many benefits from copy trading which unique to it.
Copy-trading provides the opportunity to learn about the market while making money at the same time. This does not require traders to be active all the time with the process. But, as long as you search the best traders to copy, you can copy their Return on Investment (ROI) for a long period. If someone is looking for opportunities to invest, copy trading is the best feature to follow.
This can consider as a simple process since you no need to set up complex macros. Copy trading is more popular among traders because it allows new traders to make money in the market. This considers a “people-based” portfolio. It means, in this process, instead of investing in stocks or forex, traders invest in other investors and don’t perform trades themselves.
Basic Principles of Copy Trading
Way of copy trading can vary according to the platform you select. But the basic principles are common to any platform. Trader invest a portion from the portfolio in another specific trader and follow all their trades according to the percentage. Most sites don’t allow you to invest more than 20% of your portfolio in the hands of a single trader. This can be considered a good policy since sometimes traders seem better than they are or simply hit a bad streak.
This is the same as normal trading since copy trading is also based on the observation of graphs and statistics. But in this case, traders have to observe actual people instead of market movements. So it’s important to have a better search and understand of traders’ portfolios before copying them. You have to learn and see about their strategies, success of them, risk management systems they use, and many more.
There also some risks in copy trading when you copy the other traders, as same as when you trade forex. The difference between these two is that you are not making trading decisions. And experts that you follow is the one that takes decisions on risk management instead of you.
So you can be more profitable if you take more active steps to manage your risks. You can easily spread your risks and mitigate them better when you diversify your investment portfolio as well as you can filter transactions to copy based on their risk level. If you can grab and understand the styles and trading habits of expert traders, you can pick the best trades and manage your risks.
What will be the best?
Selecting a better platform is the most important thing in copy trading. Because all the things depend on the traders, you choose to copy. Since many platforms offer copy trading, it’s better to have good knowledge as well as better research on these platforms. Usually, many experts recommend selecting big, well-established platforms to copy. Those platforms have enormous uses bases with more information, and there is a wide variety of good traders to select.
This not means that new traders are not good. But it is not easy to determine the actual situation and their interface. Most of the new platforms don’t have a large trader base; there is a limited number of selection. This is not a worthwhile situation, since copy trading is all about people. The first and most important thing you have to look into a platform is the number of users.
Copy-trading can consider as the best trading option for new traders. It may lead to having good profits if you select the right trader. Copy trading is a good opportunity to learn about strategies, trading methods, risk management systems, and many more things from expert traders. Then you can follow them independently to make your Trade successful one day.