Click here to get this post in PDF
What is copy trading? You might have heard of this term but not really understand what it means. Copy trading refers to the practice of duplicating another trader’s moves, with eToro CopyTrader. Copy trading is popular amongst online forex traders due to the fact that it’s free, can be easily implemented, and can be used on any platform.
What are Copy Traders?
Copy traders simply trade the same way as their counterparts, meaning they watch exactly how they’re spending their money. When a profitable trade is made by their portfolio, they move their funds into their next transaction, making another profit. The difference in this is that their portfolio isn’t open to other trades, they are only following what their social trading partners have done. This makes for a more controlled environment for these traders.
Advantages of Social Trading
The biggest advantage that social trading has over traditional forex investing is that it allows you to invest in markets without having to trust that your broker will always have your best interest at heart. When you have an account at a broker, it’s essentially you entrust your future trades to that broker. They make the decisions on what trades you should make based on their research, and what trades you should avoid based on their research. This means you have no say in what investments you get involved in and you don’t have any way to keep an eye on your broker’s activities.
This can pose a number of problems for new traders, especially for those who have just begun to learn about the market. Beginners can quickly become disillusioned when they see their portfolio becoming depleted by a new market phenomenon or some other major economic news event. For these reasons, new traders may want to focus their attention on social trading until they’re confident enough to jump into the financial markets on their own.
However, this isn’t always the case. There are plenty of platforms out there that allow you to participate in copy trading without using a broker. These platforms are often free to use and offer a great deal of flexibility so that even beginner traders can still have a lot of fun participating in the currency markets. Here’s a quick breakdown of how these platforms work:
When you create an account at one of these platforms you create a profile. This profile will be the place where you place orders, buy, and sell signals, and monitor your portfolio. Once you’re comfortable with navigating and making trades on the platform, another trader will add you onto his or her list of traders. If you find a signal that you think is profitable, you’ll notify the other trader by email or sms.
How the Trading Network Works
Once you’ve been added to a network, you and everyone else in your network will be notified when there is a signal that you found profitable. You can also browse through the portfolios of other traders that are listed on your network. By browsing through their portfolios, you can identify traders with similar philosophies as yours and then place trades with them. Once you make a successful trade, you will be automatically removed from their portfolio.
The nice thing about these types of platforms is that there are no minimum requirements or approvals before you can begin to place trades. While you may want to start with a demo account to get a feel for the process, you can simply place orders on the platform and then start trading with your real money when you feel more comfortable. Some platforms offer their clients’ educational videos or newsletter subscriptions. While this won’t provide you with a large number of highly qualified traders to place trades with, it can give you an insight into how the currency pairs market works and may lead you down a path towards profitable trading.
You may also like: Best Forex Trading Tips For Beginners in 2021
Image source: Depositphotos.com
