Copy trading is the next big thing in the financial markets. The feature doesn’t just let you see how other, more experienced traders manage their portfolios, but copy their moves and investment decisions directly. It all happens in real-time and allows you to earn a gross return on your investments as high as the traders whose positions you copy.
When it was first introduced, copy trading was meant to help beginners who wanted to learn about the market and become a better retail trader. Today, however, copy trading is seen as a useful feature for investing too. So, can copy trading help to grow your wealth?
Platform to Choose From
The simple answer to that question is yes, and the first reason is the fact that you now have more platforms and brokers offering social trading and copy trading as supported features. This means copy trading is no longer limited to a certain market or platform.
Copy trading has evolved indeed. There are hundreds of commodities, foreign currency pairs, and various other instruments that you can monitor on copy trading platforms. Brokers such as eToro will also provide information about the traders whose positions you want to copy.
That brings us to our second reason, which is….
More Experts to Copy
If the choices of brokers and platforms aren’t enough, there are expert traders and experienced market veterans whose trades you can copy. These are no ordinary traders. They are people who fully understand the market and they are doing very well with their portfolio.
The average return varies from trader to trader. This is where the information about the traders that we mentioned before come in handy. You can get to know about the traders before deciding to copy their positions. InvestinGoal, available on https://investingoal.com/, has a detailed guide on how to read the metrics.
The guides are detailed indeed. When reviewing Ayondo and its copy trading features, InvestinGoal went above and beyond to test features like automatic loss protection to make sure you can count on the guide as your starting point. You have all the information you need to turn a profit from the start.
Remember that copy trading is not a get-rich-quick scheme. You still have to know about the market, the instruments, and the traders. In order to really grow your wealth, you have to take full responsibility of the investments you make.
You should never copy the trades of the first featured trader you see. What you want to do is compare the ROI, the number of copiers, and their average ROIs to spot the best traders to check out further. Even then, you can still learn more about the traders before deciding to copy them.
The actual setup process is easy. You can get your trading account up and running in minutes and the copy trading rules established soon after that. The approach doesn’t require you to be hands-on with the trades. It is less stressful than having to monitor the charts all the time.
Before you start linking the copy trading account with your real forex account, it is also a good idea to do test runs. You want to make sure that trades are copied perfectly, that the internet is fast enough for rapid trading, and that problems like slippage don’t ruin your return.
Using free demo accounts on platforms that support copy-trading, copy the trades of experts you are interested in the most. The goal is not just to test if the trading strategy works – that you follow the right trader – but also to measure the performance of different experts.
As I said, copy trading isn’t a get-rich quick scheme. You cannot expect to earn big profits at the end of the first day; in fact, it doesn’t work that way. It is clearly not a sprint, but more of a marathon. Similar to trading foreign currency pairs yourself, you need patience and perseverance.
Even the best traders with the highest ROIs have bad times every now and then. You may see spikes and dips on your profit chart. Losing is a part of the experience. What you want to focus on instead is managing those losses and the risks that go along with them.
Play It Safe
One last key ingredient to add to this is risk management. Copying others’ trades means copying the risks those trades bring too. On top of that, there are external risks to mitigate. Older copy trading tools are designed to copy everything, but you now have more features for better risk management.
Rather than copying all trades made by a trader, you can set up filters to only copy the good ones (or the ones that suit your trading style perfectly). Instead of risking more of your margin to earn bigger profits, limit the size of each trade for better flexibility.
It is easy to see why copy trading is so popular right now. Aside from the more capable tools and increasing number of expert traders to follow, it is a handy instrument to use for growing your wealth and taking your portfolio to the next level.