Everything You Need to Know About Copy Trading. Does it Sound Profitable?
Copy-trading could be ideal for a rookie trader who doesn’t know how to trade but wants to profit from the expertise of someone who does. Successful traders’ strategies are often copied. Making money by copying more experienced traders enables you to maximize your ROI while assuming little risk.
In the event that you do not have time to learn how to trade the Forex market, copy-trading could be your most suitable option.
Has anyone tried it yet and if so, is the risk worth the reward?
Before you continue reading, here’s a word of caution. If it aids with your learning process, it is good.
Every prosperous trader has to make mistakes in order to enhance their skills. In your early stages of trading, it is always beneficial to seek the advice of more seasoned traders in order to understand how the industry functions.
What does it mean to copy someone else’s strategy and how does it work?
It’s novel cooperation in some forms.
Copying other traders’ strategies is favourable for amateur traders who want to follow successful traders who have disclosed their trading methods for the sake of public implementation. This is implemented through trade copier software, which links multiple accounts and as a result, when the master account buys, sells, and adjusts the stop loss, so do the linked accounts.
Two types of accounts exist in copy trading
The master is the person in charge of all trading choices. The follower is the one who mimics the master’s trades.
Moreover, the masters and followers interconnect through the platform that facilitates copy trading.
Can mimicking the tactics of other traders enable me to earn a decent living?
Like all investments in life, it can definitely yield great results but you should never expect replicating other people’s strategies to generate millions overnight.
Is there a reason for this, and if so, what?
The FX market’s ferocious volatility; a wide range of events might cause the market’s dynamics to abruptly shift and create uncertainties that numerous traders won’t expect. What has worked for former traders might not even work as well for the new one.
Think of a strategy that you believe will perform admirably under the current market conditions. You take a deep breath and anticipate the tactics to work wonders. Then all of a sudden there’s a shift in the market’s direction.
As a result, when learning to trade on your own, it’s a good idea to try replicating other traders’ strategies however combine this with your own analysis and objective thinking.
Do traders with a strong background imitate the strategies of other traders?
Ofcourse they do!
Most amateurs are thrilled at the prospect of funding a copy trading account and imitating the moves of other skilled traders. For the most part, they probably wouldn’t be able to copy for the long haul.
Why?
The individual from whom you are copying your trades is a mystery to you, and you have no way of confirming if their success will continue. It’s great if they give a brief biography of themselves, their profession, etc. Nevertheless, how can you rely on their trading method if you haven’t checked it out for yourself beforehand?
When drawdown occurs, your mind-boggling thoughts begin. Has the trading method ceased to function? Does copying the trades after recurring losses make logical sense?
As followers haven’t invented the trading technique, these queries remain ambiguous, which can lead to taking a backseat.
The following are some helpful recommendations if you decide to embark on the path of copy trading:
- Understand the strategy’s underlying principle so that you don’t end up losing after encountering a few bad trades moments.
- Have faith in the master who has a decent understanding of the markets
- Use a combination of trading tactics so that you can boost your returns relative to risk whilst reducing your losses.
- Determine who has a stake in it – so there is no further conflict of interest between you and them.
The Bottom Line
Traders of all degrees, including novices, might benefit from the skill of another investor to predict market changes. Investors can either emulate their entire portfolio or just specific trades. Setting up your Forex account is the first requirement.
Your Forex account will mimic whatever action the master undertakes proportional to the trading money associated with their account, whether establishing and closing positions or placing stop-losses etc.
The benefit is that if they make a profit, then so do you. It’s also possible to follow multiple traders all at once. When it comes to risk management, one of the finest approaches is to emulate numerous traders across many trading platforms.
Trading forex involves risk, which makes it both intriguing and painful but always remembers that as a copy trader you have the liberty to quit copying other traders at any given time and trade at your own discretion.