Nowadays, trading has become very popular among people. Technological advancement has made trading easier and simple with many trading tools. Copy trading platforms are one such tool that make it possible for new traders to copy the trades of seasoned traders and make profits from their trading strategies.
What is copy trading?
Copy trading is a trading strategy that uses automation to buy or sell financial assets like currency pairs and cryptocurrencies. It allows new traders to choose their preferred seasoned traders and copy their trades automatically on their trading accounts. This allows traders with a limited amount of trading knowledge to make profits without actually having to trade themselves. Copy trading also helps traders who want to diversify their trading portfolio and want to explore other markets.
Copy trading the forex market:
The forex market is one of the largest and oldest markets that is highly risky and rewarding at the same time. Forex trading involves the speculation of the market price of currency pairs to make profits. It is the process of buying and selling the currency pairs in the forex market where the buy or sell decisions are made based on the market analysis.
Copy trading the forex market doesn’t require traders to conduct any kind of analysis or gain in-depth market knowledge. Copy trading allows traders to copy the forex trades from experienced traders and avail benefit of their expertise and experience in the market.
How does forex copy trading work?
A successful copy trade system requires two main elements – a forex seasoned trader, and a copy trading platform.
Steps to start copy trading forex:
- Traders must choose their copy trading platform wisely – sign up on the platform and choose the forex broker that suits your trading needs.
- Once you have signed up, select the right forex trader whose trades you wish to copy.
- Though copy trading is highly profitable, it requires a good amount of research and study to pick the right trader for copying the trades. New traders must look into the trading history – their overall profits/ losses, risk level, capital management, and so on. You can look into the dashboard that has the whole detail of the experience of the trader. Traders must choose their preferred experienced trader that complies with their trading needs.
- After you have chosen your preferred forex trader, you are ready to copy their trades. Any position opened or closed by the selected trader will be replicated on your platform automatically. You can also change your chosen forex trader any time you wish to.
Copy trading the cryptocurrency market:
Cryptocurrency is the process of speculating the cryptocurrencies on an exchange or buying and selling them via CFDs. The cryptocurrency market is a nascent and still evolving market that is highly risky to trade due to its volatile and unpredictable nature.
Cryptocurrency copy trading is an automated trading strategy that allows new traders to copy the trades of experienced crypto traders to make profits. Copy trading cryptocurrency requires new traders to only research and pick suitable traders. They do not require to learn about the complex cryptocurrency market or analyse it.
How does cryptocurrency copy trading work?
Choosing a skilled and experienced cryptocurrency trader is very important to make successful crypto trades. Here is the working of the cryptocurrency copy trading system:
- Look for a reliable copy trading platform and sign up. Choose a trading broker that allows trading cryptocurrencies.
- Choose a cryptocurrency trader who is experienced and skilled in crypto trading. To analyse the skills of a crypto trader, you can study his trading history. All the details of the trades made by the trader will be available on the copy trading platform.
- Once you have chosen your crypto trader, you are ready to start copy trading. All the trades placed by experienced traders will automatically get replicated on your trading account.
Is copy trading forex and cryptocurrency legit?
Yes, copy trading forex and cryptocurrency trades are legitimate. Copy trading has been legalised by regulatory authorities like Financial Commission Authority (FCA) and European Securities and Markets Authority (ESMA). Legality also depends on whether the platform and the brokers used for copy trading are legal.
Advantages of copy trading forex and cryptocurrency:
- Suitable for all types of traders: Copy trading is profitable for all types of traders – new traders with limited amount of trading and market knowledge, and traders who want to expand their trading portfolio. It allows traders to trade without actually trading on their own.
- Saves time – Traders who do not have time to analyse the market or make trades on their own can copy trades from other experienced traders. They do not have to spend time analysing the market i.e., conducting technical or fundamental analysis.
- Can go long or short trading – Traders can prefer to copy trade via CFDs- cryptocurrency trading which is a derivative trading where traders make profits from both going short or long.
Risks of copy trading forex and cryptocurrency:
Though copy trading forex and cryptocurrency offer a great opportunity for new or passive traders, it is still not completely risk-free.
Some of the common risks in copy trading forex and cryptocurrencies are:
- Experienced traders are not always right – No matter who is trading the market, they are always at risk of losing. Not even experienced traders can avoid losing trades. So, if they lose you also lose.
- The wrong choice of seasoned traders and platform can lead to losses – Choosing the right trader is a challenge. The efficiency of successful trades depends on the choice of traders and the copy trading platform.
- Trading signal scams: Many scams have come to light. It is very important to choose your trading signal provider only after you have done your research.
Copy trading is a great option for traders with a limited amount of knowledge or traders looking forward to expanding their trading portfolio to make profits without actual analysis of the market or making trades on their own. However, copy trading is not a sure-shot way of being a successful trader. It requires patience and research to pick the right traders that align with your trading style.