Copy Trading is one of the newest ways of investing and can revolutionize the way you invest forever. Everyone at some point has met a successful investor and wished they knew precisely how he traded to get those returns. Good news now you can, and it’s called copy trading. Many platforms like eToro, Zulutrade, and Ayondo connect investors with hundreds of traders that are available to copy at any time directly. This article will help you understand how Copy Trading works.
What is Copy Trading
Copy Trading is the newest investment method and an excellent option for new investors or people that lack time to invest themselves. By copy trading, the investors capital automatically “copies” every trade executed by another trader. A similar more familiar concept is putting your money in a hedge fund that is managed by another investor. However, Copy Trading allows for a more considerable amount of Traders to choose from and significantly lowers the minimum capital required.
Essential Components of Copy Trading
Initially, the Forex market was the primary investment copy trading was used for due to its high requirements of expertise and convenient liquidity. The recent invention of CFDs allowed for Copy Trading to expand into almost all markets and made it accessible to every investor. What started as a Forex market tool has evolved to include: Stocks, Currencies, ETFs, Bitcoin, and more.
Most Copy Trading platforms have hundreds of traders available to copy from, and the majority are successful. The average trader has a mix of investments in multiple markets and uses diverse strategies to invest. On a platform like eToro Traders are categorized by performance, market, and the number of people copying.
You’re probably asking why these successful traders would let you copy them for free. The answer is they aren’t, sure your not paying them, but most platforms offer the most successful traders commission and compensation varying on their level of success.
Multiple platforms offer the service of copy and social trading, with each having their benefits and drawbacks. Choosing the right platform depends on your level of experience, amount of capital, market preference and much more. We suggest checking our platform reviews and compare platform tool to see which fits you best.
Are there any risks?
Of course, there are risks, just like in any form of investing the key is to limit risk. The best way to limit risk is through education and experience which you are doing right now. It is essential to become familiar with how the platform you chose operates, its investing features, and options. Also, it is necessary to be aware of the Trader you are copying and the strategy they are implementing. Remember not everything that shines is gold, don’t get fooled by massive returns. You may like one trader a lot, but the most important thing is to diversify your capital among many many trader and assets. Finally, don’t invest and forget, occasionally check your investment to prevent massive loss and risk.
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.