Copy Trading (CT) is a method that is used by individuals to work on Forex or other financial markets. The main feature of the method is the minimum amount of knowledge and experience needed to get started. Why would you develop new trading strategies if you can just copy them from experienced participants? Indeed, it is not forbidden to repeat the actions of other participants, and many novice traders successfully use CT. If you copy trades from another person, then you are called a copier and the other trader is called a lead (you can also say "signal provider"). It turns out that you can benefit from the actions of experienced colleagues, and if you choose the right lead, you are highly likely to make a profit.
CT is one of the types of automated trading along with social (exchange of ideas with other participants on forums, social media, etc.) and mirror ("reflection" of global strategies without minor adjustments). CT is suitable for those who value their time and want to make a profit with minimal risk. When choosing a signal provider, you should pay attention to their style, taking into account risk, profitability, stability, and other factors. You can change your lead if you are dissatisfied with your results. Experts often say that copy trading is the best way to enter the markets, as independent decision-making leads to many mistakes if the trader is not experienced enough. In this article, we talk about how copy trading works and how to get started.
How Do You Get Started? Basic steps
The first step. You need to select a trader to copy. It may seem that this is quite difficult, but on most platforms, you can easily get profiles of traders who have shown high efficiency in their work. When registering on the platform, you should be sure to find out if copying is allowed there. When you receive the list of leading traders, you can evaluate the main indicators: asset types, profit for the period, frequency of actions, risk factors, and so on. You can also rely on a person's status and fame. (You may have heard about this person in the press, seen interviews with them, or studied their guides.)
The second step. You need to decide how much you are willing to invest, as CT implies that you will have to risk your own money in order to qualify for a profit. Depending on the functionality of the platform, you can choose which part of the funds you allocate for copying. It is recommended to use risk management tools, as they improve security and minimize losses. You can divide your capital into several parts and follow several successful traders at once; sometimes, this strategy turns out to be more effective.
The third step. You need to install automatic replication of transactions on the platform where you have registered. Please note that this is also possible on Trout. A lead can perform three actions: opening, closing, or correcting a position. The essence of replication is to accurately repeat the actions of the lead on your account, and the operation is performed without your participation. What matters here is how much of their capital the lead has allocated. For instance, if they used 3% of their funds to complete the transaction, then you automatically invest 3% (or another value, depending on your settings).
The fourth step. You need to set up a risk management tool. You would set up a Stop Loss order and set acceptable limits to avoid wasting your entire capital. The lead strategy may be ineffective, in which case the system will automatically stop copying. You can set limits for a day, a month, or any other period at your discretion. You can also stop copying at any time in manual mode. You can also make adjustments if required.
Advantages of Copy Trading
Firstly, CT can be used by both amateur and professional traders, as it is a universal tool that simplifies and automates the trading process. Beginners can use the experience of professionals, and experienced market participants can use the developments of those they trust, saving their own time. The main thing is to choose the right lead with a good reputation and a high level of income.
At the initial stage, you can simply copy actions, then adjust them and develop your own strategy with high efficiency. By copying the actions of other traders, you will understand the principles of Forex trading and understand the basic principles. Instead of focusing on currencies, you can switch to crypto or trade other assets: stocks, futures, commodities, and so on. You should not forget that CT is associated with some risks, and you should keep in mind the volatility of the market. Even the most effective trader may face losses due to foreign policy, economic, social, and other factors. To sum up, CT is an effective method but it requires the right approach and responsibility; you can use CT on Forex, increasing your income and saving your time.
0 Comments