Starting out as a first time trader in the forex market is not less than a challenge for an average beginner. From learning to planning and executing your plan with perfection, all of these can put a lot of pressure on a newbie and not to mention the complex technicalities that come with trading. So, many people simply choose to not take the risk of starting from scratch and stay away from the volatile currency markets. But there is an innovative trading solution that allows you to sit back while another person with knowledge and experience does the work on your behalf. The topic of discussion here is the popular copy trading concept that can be applied by anyone and everyone with ease.
We have made this comprehensive guide with copy trading basics that can help you out in starting your copy trading journey in the forex market. Read More
What is Copy Trading?
Copy trading is a type of trading in which a trader copies the trades made by another trader. The concept of copy trading allows beginners to benefit from professional level trading by simply following an experienced trader for copying their trade position in real time. These days most copy trading platforms have added an auto-copy feature by which the process of copy trading gets automated. This trading solution can also benefit those who simply lack the time and resources to trade themselves. Check out the best trading crypto here.
How Does Copy Trading Work?
Copy trading works by connecting your trading account to that of a professional trader through a trading platform that provides copy trading services. In order to establish this connection, you will have to choose a trader from the list of top traders on the copy trading platform.
Like we mentioned before, the process of copy trading is fully automated, as the copy trading platform uses a cutting edge technology for replicating the traders of one trader in every other account that follows them for copy trading. It is more like mirroring the trade positions of another trader on your account without having to do anything manually. Means, you get to trade hands-free without any hussle.
Requirements for Copy Trading:
To get started with copy trading, the trader must have a trading account with a broker that supports a copy trading platform. You will have to meet the minimum deposit or capital requirements based on the platform and broker that you choose. Other than this, the professional trader may also recommend you to maintain a specific amount of capital as account balance based on their strategy. But following this recommendation is totally up to you and you can still trade without the recommended capital balance.
You need to make sure that the platform you choose for copy trading is transparent and trusted as the most important element for successful copy trading is transparency. The trader you choose for copy trading needs to be compatible with your own trading goals and risk-appetite. For instance, if a trader with a low level of risk-tolerance chooses a master trader who follows a high risk trading style, then the end results may not be satisfactory for the trader after copying.
Most reputed copy trading platforms will have a list of top traders who are ranked on the basis of their performance. You will also get to see their trading history, max account drawdown, return on investment, profit margin and all other essential details that you would need for choosing the best one to copy. The trader may also mention what kind of strategy or trading system they have in their bio in a brief description which can be useful to evaluate the viability of their trading system.
Advantages & Disadvantages of Copy Trading
- Easy to Get Started: Copy trading is an excellent option for traders who lack the time or knowledge to trade in the volatile currency market actively. It is a hassle-free way to get exposure to the market while someone else trades on your behalf.
- No Need to Monitor the Markets: With copy trading, traders can have a hands-off approach to trading being away from their screen, as they do not need to monitor the markets constantly.
- Access to Professional Traders: Copy trading allows traders to access the trading strategies of professional traders who have a proven track record of success. This can help them later on to build their own trading system as they get a chance to see the kind of trades that are executed by the profitable traders on the platform.
- Risk Management: Most copy trading platforms allow traders to specify the level of risk they are willing to take to ensure that they are not exposed to excessive risks. This also gives them more assurance as they still have total control over how much they are willing to lose.
- Limited Control: They must rely on the professional trader to make all trading decisions on their behalf which also means they don’t get direct control over their trading activity.
- Fees: Copy trading platforms may charge additional fees for using the service, which may add up to the cost of trading.
Things to Keep in Mind While Copy Trading
- Choose a transparent and trusted copy trading platform: It is essential to choose a reliable copy trading platform with a number of top traders to choose from.
- Research thoroughly before choosing a trader to copy: Before copying a professional trader’s trades, it is crucial to do some research about their trading strategy and performance to ensure that it aligns with your trading objectives.
- Manage your risk: Even with copy trading, you will have to set some parameters for managing your risk. This will give you more control over your profits and losses. You can use the risk management tools provided by the copy trading platform that you choose.
- Monitor the trades: Even though copy trading is automated, it is still essential to monitor the trades to ensure that they align with your trading objectives. This also allows you to take timely action if you don’t get expected results from copying a specific trader.
Best Copy Trading Platforms
Although there are many forex brokers and platforms that support copy trading, choosing the most advanced platform out of the available options can be confusing for a beginner. Hence. We have made this sought after list of best copy trading platforms that are popular among forex traders.
ZuluTrade is a leading copy trading platform that allows users to copy the trades of professional traders. It is known for its advanced automation and social trading features, making it a popular and trusted choice among traders. The platform is regulated in the EU and has a transparent algorithm based ranking system to rank traders based on their performance. Since it is an independent and free copy trading platform, you need to open a trading account with any of the supported brokers for getting started with copy trading.
eToro is one of the most popular copy trading platforms, with millions of registered users worldwide. The CySEC regulated platform provides traders with access to a wide range of trading instruments including forex and stocks but cryptocurrency copy trading is the most popular segment of the multi-asset trading platform/ brokerage. This platform also functions as a cryptocurrency exchange which makes it suitable for those who are interested in crypto investment.
Naga is primarily known as a stock trading social network but also allows copy trading in other instruments including forex and crypto. This social trading platform/ brokerage is also regulated by CySEC and allows users to copy the trades of experienced traders. They have a ranking system alongside advanced social networking tools that enable traders to interact with each other and exchange trading strategies.
DupliTrade is another independent copy trading platform that enables users to copy the trades of professional traders by signing up with a broker supporting the platform for copy trading. The platform offers a range of trading instruments, including forex, cryptocurrencies, and stocks. They also have an advanced algorithm that evaluates the performance of traders and recommends traders based on their performance.
- How Profitable is Forex Copy Trading?Forex copy trading can be profitable if you choose the right trader to copy. However, it is important to note that there is always risk involved in trading and profits are not guaranteed.
- How Much Does Forex Copy Trading Cost?
The cost of forex copy trading can vary depending on the copy trading platform you choose.
- Can Anyone Do Forex Copy Trading?
Yes, anyone can do forex copy trading. However, it is important to have a basic understanding of the forex market and trading before starting to copy other traders.
- Is Forex Copy Trading Legal?Yes, forex copy trading is legal as long as you are using a regulated and licensed platform. It is important to ensure that the platform you choose is compliant with all relevant laws and regulations.