Trading is often referred to as a skilled profession. This is because one needs to devote a lot of time and effort into learning and practicing before they proceed with trading. It is a time consuming process and becoming a profitable trader may take several months or even years. But making profits from trading does not have to be a tedious and time consuming process for everyone. It can also be effortless and easy. This can be applied to any trading market including forex, CFDS on Crypto, Stock, Commodities, Indices. And today we will be digging into the concept of copy trading which has been a revolutionary idea in the world of trading.
Forex Copy Trading
Forex copy trading is a concept that allows inexperienced beginners to explore profitable trading opportunities without actually trading on their own. Copy trading is something that requires no prior knowledge or experience to get started with. Forex copy trading will improve your chances of success as you will simply copy the trade positions of expert traders to your own trading account. It is like having an experienced trader on your side to trade on your behalf. There are many regulated copy trading platforms where you can find top traders to copy. All you need to do here is choose the right trader after deciding upon your investment and risk levels.
Criteria for Choosing Suitable Trader in Forex Copy Trading
The trader you choose for forex copy trading will play a big part in your profitability and success. So, you need to take some time to find and follow the right trader to copy. Let’s have a look at the factors you would have to consider for picking the best trader for yourself.
- Performance track record: Since copy trading is only the act of copying another trader, your profitability and success will greatly depend on the performance of the trader you choose to follow. So, you must check their track record of performance for a given period of time beforehand. A trader’s performance will be reflected through their profit margin, consistency and total return on investment (ROI). And this should be the first criteria in the selection process.
- Max Account drawdown & Risk Profile: Account drawdown is the total amount by which the capital has been reduced to cover for the losses in forex trading. The max account drawdown of a forex trader tells you a lot about their risk tolerance. You can also check their trade history and see the closed trades as well as open positions to see at what level you will be exposed to market risks when copying a trader. You should choose a trader who has the same risk profile as yours to manage your risk.
- Maturity / Experience: The main reason for someone to pursue copy trading is to make up for the lack of experience by following an experienced trader. So, you must check if they are new to the platform or have been trading for a long time.
- Followers: The number of followers a top trader has can be considered while choosing the best one for you. You should not be following a trader just because they already have a huge following. You need to make sure they meet your criteria and their trading system would suit your requirements for copy trading.
Most copy trading platforms will make the selection process easier for you with a ranking system which ranks the top traders based on their performance. You can also make use of the search filters to easily find the right trader for you.
Crypto Copy Trading
Crypto copy trading deserves a special mention as it has become a popular trend in the past few years. Newbies stepping into the cryptocurrency world may find it hard to deal with the complexities of crypto trading without any prior experience. That’s why copy trading crypto and crypto CFDs is being explored by many novice traders. This gives them an opportunity to earn profits with minimal effort on their part. In fact many copy trading platforms will be giving you major crypto CFDs like BTCUSD, ETHUSD, LTCUSD and more as trading instruments. You just need to choose a trader who is trading with these instruments just like how you would do for forex copy trading.
Copy Trading With Cfds on Commodity, Stocks and Indices
In addition to forex and crypto CFDs, copy traders can also explore other major markets like commodities, stocks and indices. Trading on your own in the stock market or commodity market can be a complex task. But if you happen to follow a trader who is proficient in CFD trading, then you can just choose these asset classes to copy their trading positions in real time.
Advantages of Choosing Cfd Trading Over Traditional Trading
Bear in mind that CFD trading is very different from traditional trading. You won’t be directly buying any stock or commodity when you choose to trade CFDs. Instead, you will be making profits from the price movements that happen in the asset. CFDs are derivative instruments that derive their value from an underlying asset. And this makes CFD trading a lot more affordable than traditional trading where you will have to actually buy an asset for trading.
- You can trade all major markets at once.
- You get profitable opportunities in bullish & bearish markets alike.
- Minimization of trading cost.
- More leverage for a lesser margin.
In short, Copy traders can benefit a lot from CFD trading as they get access to a wide range of trading instruments along with an effortless trading experience.
Why You Should Try Copy Trading
Copy trading can be explored by anyone and everyone. The purpose of copy trading is to make major markets more accessible to an average newbie by helping them to start earning before learning. And one can get started with copy trading in no time no matter how busy they are. Because most copy trading platforms have an auto-trading mode which does not require any manual intervention. The trade positions of the trader you follow will be automatically copied to your account as soon as they enter a trade. So, copy trading can be perfect for someone who is unable to trade on their own due to their busy schedules.
Or perhaps you have enough time but simply lack the will or interest to learn and trade on your own. Maybe you are still a learner but unable to develop a profitable strategy all by yourself. In both these cases following the footsteps of an experienced and profitable trader can be a good learning experience for you. You will get familiar with how a profitable trading system works and can see how professional traders manage their risk. Many copy trading platforms also have a strong trader’s community where you get to interact and learn from expert traders which is a bonus.
In short, copy trading has endless opportunities for anyone who is willing to take some risk for earning rewards in the form of profits without much effort. Just keep in mind that copy trading is not a shortcut to success in trading. Instead it is a bridge that reduces the gap between failure and success. Success is not guaranteed with copy trading but you are surely a lot closer to it when you choose to follow an experienced trader with expertise in catching profitable trading opportunities.
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