What is copy trading? How Copy Trading Works ?
- Copy Trading is when you follow the trades of another trader. It allows you to directly copy the positions taken by another trader So when the trader buys, you buy. When the trader sells, you sell. When the trader adjusts his stop loss, you’ll adjust it as well. This all happens via a connector medium either on Cloud through Broker or through an software that can connect both accounts. You decide the amount you wish to invest and simply copy everything they do automatically in real-time – when that trader makes a trade, your account will make that same trade as well.
Here’s how it works…There are 2 types of account in copy trading:
- The master: This is the person who makes the trading decisions
- The follower: This is the person who copies the trades of the master
- Copy trading is one of the easiest ways to use another trader’s expert knowledge. It also means that you don’t lose any control over the outcome. You still have the ability to close trades, and open new ones when you want.
- But by copying another trader, you could potentially make money based on their skills.
- In fact, no advanced knowledge of the financial market is required to take part!
- You do not need to have any input on the trades, and you get the identical returns on each trade as your chosen trader.
- Copy trading lets less experienced traders copy the same trades of more skilled investors. In short, copy trading is literally copying someone’s work, but in a good way.
- Copy trading is a branch of social trading, where one trader’s positions are copied by another trader’s account when they are opened or closed. This can be either automatic or manual – and it’s up to an individual to decide how they would like to approach copy trading.
- The way copy trading is conducted can be widely variable on the platform you choose. However, the basic principle remains the same. You invest a part of your portfolio in a certain trader and copy all their trades in a percentage-based manner.
How does copy trading work in Forex?
- Forex copy trading is a popular strategy, because price movements are often small but frequent, and constant monitoring is required. Copy trading in forex means that a trader can simply copy another trader’s positions rather than scanning the fast-moving forex markets themselves.
- Copy trading works by relying on social networks, social trading systems or the System of a Experienced Trader. When one trader (Master/Provider) opens a position, they can broadcast this information to other traders (Receiver) on the network, who can then decide whether they want to open the same position – or their automated trading systems can do it without additional input from the trader.
- Trading platforms such as Meta-Trader 4/MT4 or an MT-5 connected through VPS are popular platforms for social trading due to MT4’s large user base and various online user forums.
Benefits – Advantages-Pros of Copy Trading (Social)
- Beginner Friendly: A great way to trade as a beginner where you can earn and learn both together.
- Networking: Helps to network with expert traders
- Diversification: Helps you to diversify your portfolio into markets that you are unfamiliar with but want exposure to. Doing without tools is impossible and even an experienced trader recommends copying in today’s financial scenario.
- Time Saving: Copy trading saves time compared to manually trading. Traders who have less time to devote in the financial market find it as a blessing. With copy trading, you can make the most of your time by basing your decisions on those of traders with proven track records
- Education- Upskill your knowledge: For beginners copy trading is the best way to learn. It helps in learning the strategies of expert traders. One can raise questions and read why certain trade was implemented. Some of whom have years of expertise and know-how. You can learn from watching by replicating their success and developing your own trading.
- Access to Global Markets: Traders have limitations. It is not possible to become an expert in all the markets in the world. With the help of copy trading software, you don’t remain betrayed by any financial market. You get exposure to global markets and gain a global knowledge base as well.
- Accessibility: copy trading offers an interesting and reachable route into trading. Huge advances in social trading and the multiple social trading networks means this is now freely available. Through copy trading, you can access another trader’s expertise or make the most of seasonal trends that you wouldn’t usually consider as a potential opportunity
- Earn while Learn: There is a chance to gradually make money while you learn and experience the knowledge behind the trades of some experienced traders.
- Free time: you can continue to trade in the markets throughout the day as someone you have chosen is monitoring them and trading. This means you can spend time on your other hobbies!
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