Table of Contents Hide
- What Is Copy Trading?
- How Does Copy Trading Work?
- What Markets Are Most Suited to Copy Trading?
- Benefits of Copy Trading
- Risks of Copy Trading
In the world of trading, there’s nothing more exciting than copy trading. Trading platforms such as MetaTrader 4 allow you to copy the deals performed by other traders in real time. If you’re new to the scene, here’s everything you need to know about this exciting phenomenon on your online trading app. To start copying, you just need to find a forex broker with the opportunity to trade with MT4 – for example, MTrading.com.
What Is Copy Trading?
Copy trading is when an investor makes money off another investor’s trades. It’s like having your personal day trader—but without all the effort of having to talk to them! You must find a trader doing well in their portfolio and follow along with their trades to get started. That’s it!
How Does Copy Trading Work?
Copy trading works in a very simple way. You choose a trader you want to copy, and then the app takes care of the rest. To begin with, it looks at their trading history and finds the best trades they’ve made. Then, it automatically places the same trades on your account without your required input.
The key benefit of copy trading is that it removes all the guesswork from trading. You don’t have to spend hours figuring out what stocks or crypto assets to buy or sell. You just let someone else do that for you! But there are a few things to keep in mind before you get started:
Only copy traders who use automated strategies like CFD robots or algorithmic trading systems (as opposed to manual traders). These traders have proven themselves over time and can be trusted with your money.
Choose traders who trade similar assets to yours — this will increase your odds of success when following their strategies. For example, if you trade stocks but not forex, it won’t make sense for you to copy trades from someone who trades forex but not stocks.
What Markets Are Most Suited to Copy Trading?
Copy trading is a good fit for markets with low entry barriers, including low fees and low minimum investments. For example, if you want to invest in an index like the S&P 500, you can buy an ETF that tracks it. These are often very easy to purchase and hold.
You might also consider copy trading if you’re interested in a rapidly growing market with high volatility. Copy traders can take advantage of the opportunity presented by the volatility of these markets by using algorithms to enter orders on their behalf automatically.
Benefits of Copy Trading
Copy trading benefits traders and investors looking to diversify their portfolios. Here are some of the biggest advantages:
#1. Free time
One of the primary benefits is that copy trading allows you to have a passive income. You do not have to be in front of your computer all day long and watch the market to make money. You can just let someone else do that for you and then sit back, relax and enjoy your free time!
Copy trading is an excellent way to diversify your portfolio because you’ll be investing in different instruments than those you’re used to — or even ones you’ve never heard of before! For example, if you typically invest in stocks but want exposure to bonds or commodities, copy trading might be worth looking into.
#3. Upskill your trading knowledge
Copy trading allows you to follow top-performing traders and learn their strategies and techniques without the hard work of building up your own portfolio. This can help you learn faster and better than trying to do everything yourself.
It’s easy for anyone with a basic understanding of forex, stocks, or cryptocurrency markets to start copy trading, as it requires little more than an internet connection and a free account on a copy trading platform such as CopyFX or eToro.
Risks of Copy Trading
Copy trading, however, isn’t without risks, they include:
#1. Copy Trading Is Subject To Human Error
When using a copy trading service, there is the potential for human error. This can come in many shapes and forms, including bad research, poor execution, or lack of oversight on behalf of the trader who is being copied from. In some cases, this may mean losing money due to an error made by someone else.
#2. Copy Trading Can Be Expensive
Copy trading services charge fees for their services, including an initial setup fee and ongoing subscription charges. These fees can add up over time and eat into your profits if things aren’t going well with your investments.
Reasons abound for copy trading, and the overall verdict is that it has merit for various investors. Where traditional trading is concerned, even the big players use tools to give them an edge over others in the game. Copy trading takes it to another level when you can avoid mistakes, save time and make more money.