What is Copy Trading and what are its Pros and Cons?

Posted on 6 December, 2022 by Micheal Alexander

Copy trading is a kind of trading strategy that allows the less experienced traders to copy the trade positions of skilled and expert traders automatically in real time. It simply means that when an expert trader makes a trade in their account then the same trade will also take place automatically in your account. But it doesn’t mean that you don’t have any control over the returns as you are still able to close the trades and open new trades at any time. Forex signals providers

Copy trading is quite similar to mirror trading while both these trading are the subsets of social trading. It was all started in the year 2005 when automated trading was used to create certain algorithms that had been copied by the traders. Currently in Copy trading, there is no need to put any efforts and inputs on any of the trades and still you will get the same returns on each trade as your selected investor or trader.

How Does Copy Trading Work?

Copy trading works according to social trading systems and social networks followed by a trader. It can be simplified through following points:

Choose the Best Trader

First of all, you need to select the best and reliable trader that perfectly matches your trading style as well as your goals to achieve. You can check the trader’s reliability through their win percentage, number of subscribers, risk levels and profitability.

Investment Amount

It is necessary for you to understand that don’t put all your eggs in one basket. So, as per this rule, share your investment amount among different traders or trading platforms if you have chosen multiple traders or trading platforms.

Process of Copying Trades

The chosen traders or trading platforms automatically copy all the trade positions of selected traders into your trading account in real time. Copy fx signals

Pros of Copy Trading

The main pros of Copy trading are following:

No Need of Skills

Copy trading doesn’t require any skills and advanced knowledge of the Forex market. You can make good profits based on the skills of expert and experienced traders that have been selected by you. It helps the traders to invest their money with limited market knowledge.

Offset Losses

The traders can offset their losses by selecting different traders or trading platforms through this trading strategy. It also eradicates the risk factors associated with individual decisions of a particular trader.

Simplifies Market Approach

We all know that the approach of the traditional stock market is quite complex for the traders and it can only be simplified through Copy trading. You just need to follow the expert traders to copy their trades into your trading account.

Customization and Diversification

It is easier for the traders to customize their trades at any time according to their requirements in Copy trading. They can also diversify their investments by allocating their portfolio in front of multiple trading platforms or traders.

Cons of Copy Trading

The main cons of Copy trading are as follows:

Market Risks

The Forex market is an extremely volatile market and there are certain risks associated with Copy trading that should be avoided by the traders. These are the market risks with financial implications that may lead you to huge losses.

Blind Trust on Your Selected Trader

If a selected trader performs poorly then you can lose your hard earned money. So, it is better for you to do proper research and check all the trading stats very carefully before choosing a trusted and reliable trader for Copy trading. Also, don’t blind trust your selected trader and always keep a check on your trading account from time to time.