Copy trading has been around since 2005, four years before the decentralization of bitcoin. So, this is a financial trading practice tested and proven with exceptional results helping beginners get a foothold in the financial markets.
Also known as social trading, copy trading can be a lucrative practice.
But there is a catch: The beginner trader must be able to predict a successful trader whose trades they can copy. There is a famous trading quote that surmises the concept of copy trading:
"Watch the market leaders."
If you want to trade, focus on copying the strongest traders because they outperform others in the market with minimal risk.
Does that mean they never get it wrong?
Of course not. There is always a risk in every trade. How, then, can you copy trade with the best results? This article shares tips on how to copy trade and the advantages and disadvantages of copy trading. Let's dive right in with the pros and cons.
Provides Familiarity
Since copy trading copies the trades of a successful trader, you have the opportunity to build
familiarity with the practices and markets that you are trading in by following in the footsteps of already successful traders.
Increases Confidence
Trading in financial markets can be intimidating for a beginner. But your trading confidence grows if you are copying a successful person and can see their trades work for you. It is no longer hearsay; the proof is in the pudding, which, technically, you just ate. The more you learn from the copied trades, the more confident you become before going solo.
You are Part of a Community
There is a solid copy-trading community where experienced, and beginner traders meet and exchange ideas and strategies. Working with like-minded individuals helps improve trades while growing your knowledge of trading strategies.
Allows Broad Participation
You can copy trade across various financial markets, including foreign exchange, commodities, indices, stocks, cryptocurrency, and more. Copy trading is not restricted to just one security.
It Is Risky
You run the same risks the experienced traders run when you copy their trades. Just because a trader is experienced and has successful trades doesn't guarantee future success. As a beginner, you must copy the trades entirely, so you cannot escape the risks if the trade doesn't go well. Unfortunately, signal providers do not always make winning trades.
You Have No Control Over Trades
Since you are copying another person's trade, you have no control over their trading practices, decisions, and strategies. When you copy another person's trade, you copy it with all its shortcomings.
Market Conditions Frequently Change
Remember, you also have no control over the frequently changing market conditions. Master traders are also at the mercy of frequently changing market conditions, so they cannot guarantee you success when you copy their trades.
You May Have to Pay for the Trades
Sometimes, a master trader will require a performance or subscription fee to copy their trades. Traders can charge as much as $200 or more. Before copying a trade, make sure that you identify any charges that apply.
You Will Not Develop Your Skills Fast Enough
While copy trading helps you grow your knowledge of trading in financial markets, it also coddles you preventing you from learning about trading and markets sooner. Going solo allows you to gain critical experience by developing your strategies. You also get to learn from your trading mistakes and become a better trader over time.
Use the auto copy feature to replicate more experienced traders' activities easily. You can do this with the click of a button.
Auto-copy several master traders to spread your risk. That diversifies your portfolio so that if one trader has unsuccessful trades, then you have other copied trades that are successful.
Partner with a regulated broker that provides you with customer support, security, and assets.
Begin copy trading with smaller budgets as you check out the return on investments and profits.
Trade using a minimal budget so that you incur a small risk. This is a safe way to learn about trading with minimum risk to you.
Avoid copying the highest P&L traders even though they appear to be the best to copy because of their high return on investment and P&L. The higher the return on investment, the higher the risk.
Use social features like the news feed on the trading platform to get better trading insights and connect with other like-minded traders. Other social features that provide insights and accurate information include Facebook groups and Instagram. These social features benefit you with pertinent information allowing you to maximize your profit when you trade.
Do not be afraid to stop and do more research when considering copy trading. When you do adequate and thorough research, you can tell when a signal provider's trade drops and is heading to less than 30% of the overall invested amount. The research will show you if a particular trader is always at 30% and below, and if you see this happening, you can pull the plug in time to save your investment.
Avoid copying new signal providers because their trading strategies and ROI have not been verified. We are not saying that new master traders cannot have successful trades. But their strategies and trading decisions have not been tested and proved to be successful. It is better to stick to signal providers with a successful record that you can verify.
Use filters to find the best traders on trading platforms. Once you identify these master traders, look for their trading history and stats before committing to auto-copying them.
There are several copy trading apps for crypto available for beginner use. The best copy trading apps for financial markets should:
Some of the best copy trading apps for financial markets include Etoro, AVATrade, PrimeXBT Copy Trading, FXTM, and Naga, among others. Check out the following extensive list of excellent copy trading apps you can use for crypto. Copy trading is currently being used in crypto trading to make it easier for new traders to learn the ropes of trading.
Cryptohopper is a web platform that enables automated cryptocurrency trading. Cryptohopper allows you to create automated bots with customized strategies or with signal providers from its marketplace.
Cryptohopper was founded in 2017, making it one of the oldest contenders in the crypto bot space. Since then, it has gained much popularity due to its ability to set up custom advanced trading bots or copy trade with a powerful interface.
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Zignaly is a cryptocurrency trading platform with a trading terminal and copy trading feature, which copies the activity of expert traders and allows you to replicate it in your account.
At Zignaly, you copy expert traders under a profit-sharing model. Instead of a flat monthly fee, you'll pay a percentage of your earnings with no minimum investment required.
Being a cryptocurrency trading platform, Zignaly works through an automated service that performs cryptocurrency trading operations without requiring user intervention, allowing trading 24/7 using external crypto signal providers.
Since the platform's services are cloud-based, users can easily access the bot's features at any time and on any device.
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If you are looking for a platform that also offers social networking, then Naga is the crypto platform to trade on. This platform is different mainly because it uses the autocopy feature that automatically copy the strategies of other brokers and earn money from the copied trades.
Being a social media savvy platform also allows it to share a trader’s ideas, and discuss strategies not to mention learn new ones from other traders.
The main advantages of using NAGA include an extensive copy trading platform and offering MetaTrader 4 and 5. This platform allows traders to trade over 1000 asset like CFDs, Stocks and Forex. However, there is a withdrawal fee that applies when using this platform. The NAGA platform carries the NAGAX cryptocurrency exchange.
Royal_q is one of the best crypto exchanges for beginners. It is a quantitative platform that enables traders to execute the best trades 24/7 using multiple strategies. And for new traders who find success on the platform, you can refer new users to the platform using your referral link and for each newbie you instantly earn $30.
On Trustpilot, reviewers have reported that this bot can give between 20 and 30 percent profits consistently monthly. There have been many trading bots that do not perform long-term and are scams but Royal_q is not one of those. It is a proven trading bot that uses AI to perform trades on behalf of the trader.
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Shrimpy is a crypto trading platform focused on portfolio management. The platform supports ten exchanges, 13 wallets, and cold storage tracking, allowing crypto investors to get a birds-eye view of their portfolio value from a central place.
Shrimpy's features offer serious crypto investors a solid solution for their portfolio management and tracking needs.
You can easily keep your portfolio balanced thanks to Shrimpy's portfolio rebalancing feature. Shrimpy offers two rebalancing strategies: periodic and by threshold. With periodic rebalancing, the platform checks the asset distribution periodically and rebalances the assets if necessary. With the threshold rebalancing method, the platform monitors each asset's distribution and when an asset exceeds a certain threshold (15% change by default), it will rebalance the portfolio.
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