Copy-trading allows individuals in financial markets to automatically copy all positions opened and managed by some selected individuals. Unlike mirror trading, which is a method that allows traders to copy some specific strategies, copy trading links a part of the copying traders’ funds to an account of the copied investor.
Any trading act made by the copied investor, such as the opening position, assigning top losses and take profit orders, or closing positions, are all excited in copying traders account according to proportion in between the copied investors account and copying traders allotted copy trading funds.
Copy trading mechanics:
Copy trading connects one part of your portfolio with a portfolio of the trader that you choose. Once you copy a trader, all of their opened traders are also copied to your account.
Further more, all of the actions you take in the future are also automatically copied to your account. You are prompted to pick a sum to invest in the certain traders you choose. In many cases, the sum isn’t more than 20% of your portfolio.
The sums used in trades are the calculated percentage of traders’ portfolios based on how much you choose to invest. Imagine your accounts balance is at present USD 1000. You don’t have open trades, but you have chosen that you wish to copy a trader.
His stats look quite promising, but since it is your very first time trying something of this kind, you don’t wish to invest that much. This is why you invest USD 100. The trader has one open left trade that is copied to your account.
This sum of USD 100 that you invested is the percentage of the trader’s portfolio. If his portfolio is USD 1000, then your investment is 10% of his overall portfolio. If he makes the trade for USD 100, you will be making the same trade, but the money that will be invested from your actual account will be 10% of the money that he has invested.
Why is copy trading advantageous?
Trading, in general, can be quite intimidating. It is not easy to start with, and once you throw charts and the patterns into the mix, it becomes confusing enough to start throwing even the most enthusiastic newbie trader in panic mode. Copy trading assists you in getting rid of this fear. It allows you to start trading without knowledge of trading. This way, you can see what experienced, and highly successful traders do and figure out why. If they are far more talkative, they may also directly show you and give you some tips. It is a mutually beneficial relationship.
Also, smart is the one that learns from his very own mistakes, but wise is the one that learns from the mistakes of others. Surely, you may not have taken the trade in your life. But this won’t stop you from seeing what will work and what won’t be based on the successes and failures of others. In time you will start learning to see everything you need to be a trader yourself. All you require is time.
Having a better copy trading platform will let you enjoy the benefits of this form of trading. Forex copy trading is reaching high extremes as well, and it is helping people make money.
