Today, many of the social Forex and stock trading platforms offer copy trading options. Copy trading allows you to directly copy another trader’s positions and bind a portion of your portfolio to theirs. By linking your profile to other traders, you are copying all of their current market positions, and any action they can take from now on.
If they open up a new trade, you open up a new trade. They close, you close. They win, you win. And unfortunately, if they lose, you do. However you can easily make money based on their skills by copying another trader.
Why Copy Trading is Popular
This form of trading is becoming increasingly more popular due to the fact that it helps novice traders to make money on the market. In fact, there are many traders who build the portfolios known as “people-based.” This means that instead of investing in stocks or Forex, they are investing in other funds, and are not doing business themselves.
Basics of Copy Trading
The way copy trading is done on the site you select may be widely variable. And the underlying principle remains the same. In a certain trader you invest a portion of your portfolio and copy all their trades in a percentage-based way.
For diversification purposes, most platforms will not encourage you to invest more than 20% of your portfolio in a single trader’s hands. This is a really good idea because the traders often seem better than they are or they just hit a bad streak.
You don’t want to have spent too much in them when that happens. Well, further in the guide, cover some channels but this is all you need to know about right now.
A Question of the Reliability of Copy Trading
Numerous experiments were carried out in an effort to calculate the success rate of people using copy trading. Results show that people who choose their traders carefully on the basis of statistics and portfolio are up to 10% more efficient than people who trade manually or choose their traders based on personal preferences.
The story’s morals-leave your subjectivity at the door. For a reason, all of those stats are there-use them.
