All there is to know about copy trading

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Copy trading is the act of duplicating another trader’s positions through the use of social media platforms, automated systems, and signals. Copy trading is popular among forex traders and may be found on a variety of third-party platforms, including MetaTrader 4.

There are a plethora of copy trading brokers available, each with its proprietary or third-party copy trading platforms. Some cryptocurrency brokers and exchanges, such as Coinbase and Binance, are catching up and starting to provide their own social and copy trading capabilities.

How Does Copy Trading Work?

Copy Trading allows you to link a portion of your portfolio to another’s, with all open trades and future actions being copied to your account automatically. A trader can consider following a long-term investor in the stock market as an example of how to diversify a portfolio. Followers must decide how much to contribute and can always fund more or less based on the trader’s success.

However, because this trading entails risk, traders should always conduct their studies and thoroughly understand how it works before investing money. It’s worth noting that although some platforms provide you with some control over your money, others function on a set structure. You can cease mimicking a trader with a fixed system, but you are unlikely to have much power otherwise.

Copy Trading step-by-step guide:

  1. Creating an account on reliable stocks and trading platform is the first step in copy trading. There are opportunities to follow other traders on most trading platforms. There are a variety of criteria to consider when choosing a trader to follow. For example, you could wish to follow a trader who makes more money or has a regular trading pattern.
  2. The second stage is to choose how much you want to invest and how much you are willing to risk financially. Never put all your eggs in one basket, as the expression goes. Begin with a modest percentage of your discretionary income, and keep in mind that investing always has the danger of losing all of your money.
  3. The third and last step is to just observe! Trading programs will automatically copy trade your stock pick with the other investors you’ve chosen to copy. However, there is a manual approach to copy trade by examining what your peers are purchasing and selling in their portfolios.

How To Open A Copy Trading Account

You must first create a live account with your selected broker to open a copy trading account. Check your broker’s regulatory status first, since this will impact the amount of security and fund safety you’ll receive. To invest in another account, traders must first deposit dollars into their account.

Once you obtain your login data, you may need to link your copy investment system to your real account, depending on your platform. Guidance on how to accomplish this is generally provided by the broker. You can begin trading after your accounts are set up.

Copy Trading Platforms

Copy trading can be given through a proprietary program or a third-party platform, such as those listed below, depending on the broker. Some brokers, such as Telegram or TradingView, additionally provide extra research tools or networking forums.

Copy Trading With MetaTrader 4

MT4 is designed to allow you to copy professional traders’ transactions and techniques. From within the site, go to the Signals page to obtain over 3,200 free and paid signals from leading forex sources. Traders are evaluated according to their performance, making it simple to pick a supplier and set your preferences. After that, you may start copying transactions in both live and demo mode.

Copy Trading With MetaTrader 5

The MT5 platform, like MT4, allows you to copy other people’s trades instantly. The MT5 platform connects traders across geographies and brokerages, so masters and followers don’t have to use the same broker. Subscription fees are established in the MT5 market place, and quick data transfers assist in eliminating execution delays.

Copy Trading With DupliTrade

DupliTrade’s automatic trading system is among the best in the industry. Users can choose what proportion of transactions they want to duplicate and can scale up or down. Anyone can copy trades in forex, equities, indices, and commodities markets. Clients are supplied with all the data and numbers they need to make an informed decision, while those intending to sell their trades must undergo a rigorous audit process.

Copy Trading With cTrader

The integrated cTrader solution is another popular platform. Clients may go to the Copy section when they’ve created an account to look at different strategies and compare provider history, risk appetite, and costs. Clients choose how much money they wish to put into mirroring a certain trader, and they can duplicate numerous suppliers at the same time.

Advantages of Copy Trading

Good for beginners

One of the main advantages is the simplicity of having someone else perform the job for you, which means you don’t need to be a copy trader genius or expert to participate. It’s also ideal for anyone who doesn’t have the time to devote to full-time day trading.

Portfolio diversification

Traders can have access to chances or trends that they might not have considered otherwise without the assistance of another trader’s knowledge.

Demo accounts

Some brokers provide demo copy accounts, which are perfect for beginning traders who wish to familiarize themselves with the platforms. Demo accounts are free, risk-free, and can provide beneficial research tools.

Authorised practice

Key regulatory frameworks, including CySEC, ESMA, MiFID, and the FCA, all recognize copy trading. Choosing a licensed and trustworthy broker will guarantee that your cash is safe and secure and that you are not a victim of fraud.

Disadvantages of Copy Trading

Risk

Even if you copy an experienced trader, the risks can be high. If a strategy fails, the risk will be transferred to a follower’s account, potentially resulting in a financial loss.

Fees

Copy trading may involve costs, depending on the broker. Clients of OctaFX, for example, pay a Masters’ commission, which is calculated per a lot of traded volume and payable in USD. A minimum deposit amount will also be required to invest in a trader. The minimum deposit at eToro, for example, is $200.

Control

One of the main downsides is that once a trader begins copying an account, they lose control of their portfolio; they are handing their money to a stranger.

Not widely available in the United States (US)

Due to the Dodd-Frank Act, which placed limits on lenders to protect US customers from fraudulent tactics, copy trading is typically not available to citizens of the United States.

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