WHAT IS COPY TRADING?
Copy trading is an investment method that, as the name suggests, allows you to automatically copy positions taken by other traders so that you can copy their performance to your personal account. Indeed, you would be linking your profile to that of another trader, so you will make money from his skills.
How copy trading works
The exact way copy trading works depends on the platform being used, even though the concept remains the same. The investor would invest a percentage of his portfolio into another trader’s investment account, copying all his trades. This means that if he opens a trade, the investor opens a trade; if he closes a trade the investor would close the trade. Logically if he wins, the investor wins, and if he loses, the investor loses.
Copy trading has become more popular in recent years, especially among new traders. Why?
Simple: if you are a new trader, copy trading is a simple way to enter the market. As an investor, you might have minimal knowledge and experience but be successful if you follow a successful and experienced trader.
Effective: to be a successful trader, the investor needs to analyze the markets on a daily basis. This task will take a long time to learn how to do it and to implement it every day. When the trader uses copy trading, you only analyze the trader and then copy his trades taking advantage of his experience who has invested his time in the financial and technical analysis of the markets.
It removes emotions: many traders have excellent strategies but fall when their emotions get in the way. If you are an emotional trader, copy trading could be a good solution for you.
As with all types of trading, there is risk involved.
No one can predict the results and even if the investor follows an experienced trader, he does not have guaranteed success.
Copy trading can be a great way to enter the market while the investor learns the ins and outs of trading for himself. Understanding risks and taking precautions to increase your chances of success is critical.