If you are sure that trading on the Forex market is too complicated for you then you should consider the copy trading. The essence of copy trading is that there are really good traders who trade on Forex profitably, and you can simply repeat their transactions on your account. How to do that read in the article.
How copy trading is held
The process of copy trading is automated and held through special copy trading services or platforms. You get registered in such a copy trading platform, choose a professional trader from the list, pay him a certain fee and his deals are automatically reproduced on your trading account. With his financial results too. You can repeat all of his transactions, or set some filters and limitations. For instance, you can copy some percentage of his orders according to the sum on your account. Also, you have the right to interrupt into trading and close orders which you don’t like.
Surely no one would share his expertise for free. So, you should pay a trader a certain amount for transactions copying. It can be some part of profit or set monthly fee. The trader who sells his signals pays some commission to the service which transmits these signals to subscribers. Broker companies are also involved in the process – they bring clients, both traders, and subscribers, to the copy trading service. So, the cooperation chain looks like this:
Generally, the copy trading includes the following steps:
- A good trader signs up in a service of automated copying of trades, opens an account and provides statistics of his trading to be shown to potential subscribers. Thus, he’s considered as a signal provider.
- An investor (someone who can’t or don’t want to trade by himself) finds the appropriate signals provider on a broker’s website or inside a copy trading platform. He subscribes to the transactions of a chosen trader and becomes the subscriber.
- The provider executes orders on his trading account with his broker, these orders are transmitted through the copy trading service to the server of the subscriber’s broker, and, finally, to his live account.
The feature of copy trading is that you deposit your own account and have not to send funds to the provider like it is going with PAMM accounts. All transactions are carried out on your trading account with your deposit. The best situation is when deposits of the provider and subscriber are approximately equal. The same can be said about leverage and other trading conditions. Although, some services allow to scale transactions, and to copy, for example, 10 times smaller deals.
Should we equate copy trading and social trading?
Copy trading is usually being associated with social trading. Are these the same things? I think, no. As for me, the concept of the social trading is wider and includes all the things about communication and support among traders involved in forex trading.
It’s like a huge social network for traders of any experience level. They can share their trading experience, wins and fails, opinions about brokers and so on. This is extremely useful for newcomers and makes trading process fuller. I am thinking about writing an article on this subject.
Tips for picking the reliable signals provider
The success of copy trading lies in picking a really good provider. So, make a right choice following the next tips:
- the good provider must be active for pretty long time, he should have a long trading history of several months at least;
- he should be active i.e. make enough amount of trades within his trading period;
- the good provider has a lot of subscribers;
- his trading strategy must suit your needs and not be too risky;
- his monthly income should not be lower than 15-20%;
- the drawdown should not be higher than 25-30%.
The best signals are sold for the highest price, so you should find the balance between the rating and the cost. There are also free signals on the market. They are provided by amateur providers who work for the ratings.
Advantages and disadvantages of copy trading
As any other matter copy trading has its strong and weak sides. Let’s start with the pros:
- you can earn on Forex without having deep knowledge of the market and trading;
- you can choose suitable signals provider with definite trading style;
- you have enough spare time because you do not need to observe the market;
- you can copy signals of several providers and diversify risks.
So, what about disadvantages?
- you still risk with your money because forex trading is full of risk by his nature and even an experienced trader may suffer losses;
- you lose your trading skills when someone trades instead of you;
- your trading platform must be turned on 24/5.
Copy trading platforms
If you’ve got interested in copy trading you should choose the copy trading platform and register for it. The most popular services are:
I will write about some of these platforms in my future articles. Wish you only professional providers and big profits!