What is copy trading and how does it work?

These days, investing and trading are no longer so strongly associated with some professionals who have been in the business for decades. In recent years, terms like trader or investor have taken a sharp turn in the perception of the financial world.  Today, copy trading is rapidly gaining its popularity. It is the so-called copying the trades of successful traders to your own account. We are not even talking about the copy trading crypto, which has simply exploded the market.

So, if you’re wondering what it is and if it’s a good investment option for you, as well as what types of copy trading exist, we’re ready to tell you all about it.

What is Copy Trading?

Always wanted to know what copy trading is? The answer is right in the name, but we will of course reveal it to you in more detail. Roughly speaking, you will be copying the very different saddles of some other investor in a comparable way. This means that you can trade on the most different stock exchanges, without having any fundamental knowledge.

However, copy trading should not be confused with such a term as social trading, these are slightly different things, we will talk about this later. You may have also heard about mirror trading – another very similar concept with the same matrix, but different in practice and in theory. 

Copy Trading in Cryptocurrency

We also just can’t help but devote a little time to, shall we say, such an industry in copy trading. In fact, the principle is absolutely the same, but from the name it is clear that here we have cryptocurrency. However, it is worth noting that here we can let’s say a better acceleration and faster increase the rate of profit. 

But, accordingly, the risks increase, which, as in any business with cryptocurrencies, are connected with its volatility. Recently there are more and more copy trading crypto platforms, and for good reason, because many believe that crypto is the future.

How to Copy Trade

So, if you’re new to copy trading, then we’ll show you a universal formula for how to get started. As you work or build up your skills, you’ll be able to adjust your workflow yourself.

  1. To begin with, you look for and choose some trader that suits you. Then you need to study him, for example, look at his profitability, the rate of risk or the total amount of funds under the trader’s management. It is also important to look at the profitability of his investments.
  2. The second thing you need to determine for yourself a comfortable size of investment. Act in a balanced manner and do not invest all of your capital in one trader.
  3. Then the platform on which you work will be already automatically copy all positions of the chosen trader in your trading account.
  4. Do not forget to invest extra money if you like your chosen trader and you see that things are going well. You can also reduce your investment in a trader and diversify your portfolio by limiting your investment to one trader.
  5. You should also know that there are no additional commissions for copy-trading – you pay the manager only for profitable trades. The standard broker’s commission is charged for copied trades.

As you can observe in principle there are no strong difficulties, in time you will adapt and it will be easy for you.

Copy Trading vs Social Trading

Although these two trading strategies are at first glance very similar, they do differ. And it is important to find out for yourself what those differences are. It would seem that this question is very complicated and now we will deal with it for more than one hour, but no. Here everything is easy and simple as compared and explained.

In social trading, you submit to yourself and make your own decisions. It’s ideal for those who want total control. Yes, there can be more learning difficulties, but the whole situation is under your control and you are fully responsible for your trades.

As for copy trading, we’ve already figured it out. Copy-trading can be ideal if you want the work to be done for you.

If you have a question, so what is the best and what should I choose, then there is no clear answer. However, recently there has been a real improvement in the position of copy trading, perhaps this is worth thinking about.

 Is Copy Trading Profitable?

Here you can just answer yes and forget about it, but we will of course explain everything to you in more detail. Just look at what copy trading gives us and you get the obvious answer:

  • A great way to gradually make money
  • One of the best ways to trade for beginners
  • Helps you make contacts with expert traders
  • One of the best ways to earn passive income

But you should never forget that copy trading is always a risk, so you need to approach this business with all seriousness and awareness. If you’re looking for a convenient way to trade within your knowledge and experience, copy-trading is a viable option.

Conclusion

Now that you’ve read the article, you probably understand what copy-trading is, and learned about its features, pros, and cons. We hope that we have given you enough information and you will be able to make an informed choice. The best way to understand if copy-trading suits you is to try this trading strategy on your own experience.