What Is Forex Copy Trading And How Does It Work?
As the years have gone by traders have learned new strategies and ways to increase their profits and reduce their losses. New strategies, platforms, EAs and other tricks and technologies have been developed to streamline not only make trading easier for many traders but also much more profitable.
One of those recent developments is Copy Trading.
What Exactly is Copy Trading?
Copy Trading is a part of social trading which is a very recent development in online trading. Unlike mirror trading where you can copy a strategy, copy trading allows you to link a part of your account’s funds to another trader’s account. So, whatever action was taken by the copied trader is replicated in your account according to the proportion set by you.
However, in most cases, you cannot set a very high amount though that differs from broker to broker.
Here’s an example, let’s say you have $2500 in your account and wish to connect a portion of that amount to another trader’s portfolio. You can connect around 15% which means that only $375 is available to be traded with the strategies copied from said trader’s portfolio.
And one of the best parts about copy trading is that after you have made the initial connection, you do not have to actually make any trades of your own. In fact, one of the benefits of copy trading is that you can start trading without any knowledge of your own. You would be using the knowledge and experience of a more experienced trader rather than your own.
Adjustments to Your Connection
Although you do not have to do anything after your initial to the trader’s portfolio. It is advised that you check the progress of the trades being made. In some cases, you may want to increase the amount available in the copied portion of your account. In other cases, you may want to reduce the amount available because you see a streak of bad trades and do not want to lose any more money. It is all up to you.
And some platforms even allow you to change individual trades. But this depends on the broker and platform being used. You’re advised to choose a platform and broker you’re comfortable with and to thoroughly research the trader you’re planning on copying.
All in all, copy trading has loads of benefits especially for beginner traders and it can be really beneficial to those with not enough time to trade on their own. At the end of the day just ensure the trader you’re copying is one that will make you a profit. Not a loss.