Copy Trading Definition
Copy trading is a technique used in the world of financial investing where traders copy the trades of other, typically more experienced, traders in real-time. It allows individuals with varying levels of expertise in trading to enter markets without having to initiate trades manually or decide upon investment strategies alone.
Copy Trading Key Points
- Copy Trading is a strategy used in financial investing that facilitates automatic replication of one trader’s positions by another trader.
- The process relies upon a system of social trading, encouraging cooperation between inexperienced and professional traders.
- It allows novice traders to benefit from the extensive experience, knowledge, and strategies of more seasoned investors.
- This method is highly accessible and prevalent in a variety of markets, including foreign exchange, stocks, and cryptocurrencies.
What is Copy Trading?
In its simplest form, copy trading is a method that offers inexperienced traders the opportunity to replicate the trading decisions of more experienced, usually profitable traders. This technique rests upon the premise of ‘mirroring’, enforcing passive trading by automatically copying the real-time trades of successful investors.
Why Copy Trading?
Copy trading is beneficial for beginners in the financial market who may not have a thorough understanding of trading strategies, systems, research, or risk management. By mimicking successful traders’ transactions, novices can attain comparable results while concurrently learning the ‘nuts and bolts’ of the trading world. Additionally, it saves time for those who cannot consistently monitor the market movements.
When to use Copy Trading?
Copy Trading can be employed in numerous financial markets – foreign exchange (forex), commodities, indices, equities, and particularly the rapidly growing cryptocurrency market. Furthermore, it is an excellent option for individuals who seek exposure to various assets but lack the time or expertise to investigate and strategize individually.
Where to use Copy Trading?
Copy trading is mostly done on online platforms that connect traders globally, known as social trading platforms. These platforms, including eToro, ZuluTrade and CopyMe, not only facilitate the copy trading process but also provide an avenue for community interaction, learning, and discussion amongst traders.
How does Copy Trading Work?
After selecting a trader to copy, a fixed portion of an investor’s capital is allocated to replicate the chosen trader’s operations. This is done automatically, meaning once a trader executes a trade (buys, sells, etc.), the same trade is performed in the copier’s account. The proportion of the copied trade is dependent on the capital assigned to the copied trader, hence profits or losses incurred are proportionate too.
