Trading has been one of the most entertaining and risky fields of business. Although it requires a lot of your brain cells, who does not love getting hefty sums of money just with a few clicks and techniques on trading platforms? Now, in today’s technological era, it has become easier than ever to trade without having to do a PhD in the strategies. With the introduction of copy trading, you can make investments like a pro without needing any help from the experts. In this guide, you will discover what copy trading is and how you can start investing and making profits!
What is Copy Trading?
Wondering how copying someone can help you make money? In trading, a new phenomenon got super hit as it not only allows you to copy the strategies from eminent experts but also their step-by-step plans. This way, you can make money without investing your complete brain and energy. The best part is you do not even need prior knowledge of trading or investing to do so.
How Does Copy Trading Work?
As the name suggests, copy trading is mostly about copying skilled and experienced traders. They basically do all the work, and the copiers benefit from those investments. It is ideal for beginners who wish to establish themselves in the world of trading. Copy trading starts when an investor becomes a provider of techniques. They work on different copy trading platforms, and there, the new traders can choose which provider to copy and get help with their investments.
How to Copy Trade?
You must wish to start your own trading once you have understood how copy trading works. It is a simple yet fascinating field of business and does not involve too many tricks like normal trading. So, gear up and follow these steps to discover how you can easily copy trade now!
Step 1: Choose a Copy Trading Platform
One of the very first steps is to choose a copy trading platform where you will meet your provider. It is important to look for a reputable and easy-to-use interface so that you do not get scammed or frustrated. There are many good options available, so first, do your homework and then land on the battlefield.
Step 2: Fund Your Account
Once you have figured out which platform to choose, you will need money to fund your investments and begin trading. A few websites require a minimum deposit to sign you up. So, it is necessary to have a little money in your account to get started. You can deposit funds via bank transfer or a debit/credit card. An e-wallet option is also available to facilitate you better.
Step 3: Find Traders to Copy
Now, when your account is loaded, you have to look for traders that you can copy. There are various traders on the platform, so you can easily do your research and choose the one that looks best to you. Their trading history, winning rate, and all of their statistics will help you choose the perfect match for you. When you know who to put your trust in, you can set up your account accordingly, and it will automatically start copying the trades for you!
Step 4: Monitor and Adjust
Daily check and balance and monitoring is a crucial step when you have started to copy trades. You always have the option of switching your provider if you see a decline in their performance. In addition, you can choose different traders with diverse backgrounds and strategies to copy. Just make sure you keep a good eye on their performance to avoid any losses.
Terminologies Used in Copy Trading
When you are new to the trading world, you need some time to establish your feet. There are a few terminologies that are frequently used in the copy-trading world. You do not need to get confused when you hear about them at first. You can find these a major help when you start to copy-trade and generate profits, ensuring you do not look like a dummy in front of others!
Fixed Size
Its basically deciding your own amount you want to invest when making the trade. You do not have to completely follow the trader, but you can only follow their strategies and choose the amount you wish to bet. So, the ‘fixed size’ is selecting the total amount you are investing in.
Mirror Master Size
With the ‘mirror master size,’ you are copying the trader entirely. From his strategies to the amount he is investing in his trades, you are replicating every move with your account. Your account size does not matter here, so you can easily make profits while mirroring your provider.
Mirror Master Risk
The ‘mirror master risk’ allows you to take risks depending on your account size. This means that you take the risk, following the trader but also keeping your account size in mind. The percentage of the risk matches but not the amount of funds, making the loss seem not to be large.
Max Drawdown
Maximum drawdown aka hard stop, is one of the key aspects to keep your account safe. It is basically the maximum loss your account can tolerate and indicates the downside risk. There are different levels to the drawdown that help you stop your account before losing everything.
A ‘warning level’ starts coming up when the maximum limit of losses has been reached. A ‘soft stop level’ means that the trades will be suspended if it reaches that limit. A ‘hard stop level’ is your red light of defense. This is when all your trades are suspended, and you will not be copying anymore.
Advantages of Copy Trading
Automated Trading
The automated trading options on different platforms allow you to handle your investments automatically without keeping an eye on the market all the time.
A good alternative for first-time traders
Copy trading is an ideal alternative for beginners wishing to establish their career in the trading business. It will help you copy trades and generate larger profit sums right away!
Low danger
When you are a newbie in trading, you are at a higher risk of losses. With copy trading, you can avoid this danger as you will be mimicking the steps of experienced traders and investors.
Disadvantages of Copy Trading
Dependency on Other Traders
Your success is completely dependent on the trader’s choices. The main disadvantage of following the steps of other traders is that the hyper-dependency may cost you losses.
Limited Control
The Maximum drawdown helps you put limits on the risks of the overall trades. Yet, you still have a very limited amount of control over individual trades.
Market Risks
Although you are copy trading, this does not mean the market risks are out of the equation. Your profit and losses still depend on the ups and downs of market position and help you generate income.
Maximizing Your Copy Trading Experience
Once you have set foot in the copy trading world, you can still work on your expertise and profit. You can find a few of the techniques that might be helpful to make the most of your trades.
Prioritize Risk Management
In trading, your number one priority should always be about managing risks. You must carefully invest money to avoid larger losses. The stop losses feature is a hit to effectively manage the risks. It is necessary to keep a good check on the performance of the traders you are copying in order to ensure the safety of your assets. This makes sure you stop at the right time.
Embrace Diversification
If you have a diverse group of traders, you suffer losses comparatively less. Having different providers manage your investments will allow you to manage your income efficiently. This will also help you have a stronger stance in the market, giving you stability and good money.Â
Invest Responsibly
Even though, copy trading gives you a huge turn-over, you still should be investing carefully. When you are just starting your investments, always begin with a small amount that you are comfortable with. It is important to monitor your performance daily and then gradually increase the investment amounts. This ensures safe and responsible trading.
Conclusion
Copy trading is like that shortcut you take to reach new places faster and hassle-free. It is a perfect choice for beginners who are looking to make their place in the trading market. They can start fresh and follow in the footsteps of experienced traders to achieve their goals smartly. Copy trading is a great option, but you must also look into all the aspects of risk management to generate profits efficiently. From choosing the appropriate platform to investing money, copy trading will help you at each step, making your trading journey feel like a smooth breeze!