4 Questions before you start Copy Trading
1st Question. Trade socially? Copy other traders? Or be copied?
Social Trading works on the basic principle that the knowledge of many is better than one knowledge of one. Beginners will be more interested in absorbing information, while experts will be happy to share information … as long as everyone benefits.
In practise with Social Trading this means you’re part of 3 main user groups and you have to decide which one you belong to:
You want to “Trade Socially” which means you want to trade yourself (and maybe already have been in the past), but you like to actively use information from other people to help you with your trading. For example this may mean looking within your Social Trading Network at the overall sentiment (Buy or Sell) of a currency pair you like to trade. Or it could be looking at the newsfeed of a stock symbol to see what people are saying about the company or how they’re trading the stock.
I.e. it’s basically using real-time views and sentiments to make your trading decisions instead of, or in addition too, fundamental and technical analysis.
COPY OTHER TRADERS
You actually don’t trade yourself, or you don’t have the time, but you do believe that there’re some good traders out there who make some consistent money in the long run. Rather than trading yourself based on their ideas you just automatically copy the trades of these expert traders in your account.
BE THE TRADER
You are a top trader yourself and you want to make some additional money by letting other traders copy you. You therefore share your trading signals on a social or copy trading platform, which in return will pay you a commission based on how successful and popular you are.
Please note though that these groups are not totally mutually exclusive. E.g. you can trade socially yourself and copy a few other traders (to spread your risk) … and once you become very proficient you may start offering your trading signals to others (and get extra money).
But nevertheless before you start Copy Trading you have to decide what your main reason is to start Social Trading since it will have an impact on which social trading network or trade copying platform you should join.
2nd Question. Can I afford this?
Social Trading is not some kind of magic potion which means you’ll be making money without risk or effort. No, trading is inherently risky and even when you copy other traders who have an excellent track record, there’s no guarantee they’ll stay successful.
I’m not a financial advisor, but anyone will tell you that if you plan to trade (socially) or copy other traders, you should never invest money you cannot afford to lose!
On the other hand, unlike many other investment options you can try social trading for free or start investing with real money from very small amounts (depending on the broker from $10 upwards).
Quite a few platforms such as ZuluTrade and Ayondo also let you send trading signals from a demo account. This means if you have or can acquire the skills to be a good trader, you can actually make money from other people copying you, without having to invest anything yourself. The only thing you’d need to invest is your time and knowledge.
3rd Question. Do I have the patience to be successful?
Whichever type of social trading user group you belong too, this is not a get rich quick scheme (and too be honest I don’t think those exist, otherwise please get in touch).
If you trade yourself or copy other traders you need to view your results over a reasonable period of time. Everyone will make mistakes and make some losses at some stage. That is the nature of trading. The key is to make sure you understand the key principles of money and risk management to ensure you when you go through a bad run your losses are minimised and limited.
The more time you can spend trading and educating yourself, the more likely you will be successful (whether you trade yourself or just copy others!). We’ve written some useful social trading tips on this website, but there’s a lots of information available elsewhere online too.
eToro is probably the best network for beginners and less experienced social traders. Not just because their easy interface and unlimited demo but also because of the amount of training materials on their website and active trading community.
If you’re not patient and don’t want to put in any effort, then don’t start Copy Trading!
4th Question. Which Social Trading network or platform is right for me?
There are many social trading networks and copy trading platforms you can join. However, depending on your profile and preferences some will be more suited than others. Things to consider include:
- Do you want to be able to try with a demo account first or not?
- If you invest with real money, what’s your initial investment?
- Do you want to trade via your tablet or mobile phone as well?
- Do you want to get paid if other people copy you?
- What currency do you want to use for your account?
- What financial instruments to you want to trade?
- How do you want to manage your risk?
These questions will all have an impact on which network or platform is best suited for you.
To help you though we’ve got two useful features:
- We created a table which compares the features of the social trading networks and platforms. This table is kept up to date regularly.
- We also created a quiz tool which based on you answering a few questions will list the social and copy trading platforms best suited for you.
And of course feel free to contact us with any questions you have too. We’re always happy to help you start Copy Trading.
If you need more information do not hesitate to contact us, it will be a pleasure to assist you.
Remember that you have all the information about copy trading in our sections:
- Platforms: Information of each of the platforms of copy trading. Go to Platforms
- Guides: The best guides on copy trading. Go to Guides
- Reviews: Best reviews on copy trading platforms. Go to Reviews
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Currency trading with leverage implies an important risk for the investor and there is always the possibility of losses. These instruments carry a high risk if they are not managed properly and a profit can quickly become loss as a result of price changes. Due to the risk factor inherent to this type of trade, only funds intended for risk investments should be used. If you do not have extra capital you may be willing to lose, you should not trade in the forex market. It has never been proven that there is any system or portfolio of systems that is completely safe and no one can insure future profits or losses. Before you start trading in the forex market you should think carefully about your goals as an investor, your level as an investor and your risk aversion to determine if this is the type of investment you want to make. If you are in doubt you should seek advice from a professional financial advisor to advise you about the investment.