What is Copy Trading?
Trading is a complicated business. There are lots of people out there who would love nothing more than to be able to play the stock market at their leisure and see what they can accomplish financially. However, the perceived high barriers to entry put many people off.
There is certainly no doubt that knowledge and experience are both powerful tools for investors and both are necessary for success. However, investing is much more accessible than it used to be. It is now possible to invest with less money and less prior knowledge than ever before. There are a number of innovations that have made investing more accessible; among them is copy trading.
Copy trading is a form of trading that is partly or entirely automated. Put simply, a copy trading platform is a platform that enables investors who use the platform to copy the trades of other investors. In doing so, investors with less experience are able to benefit from the knowledge and insight of more experienced investors.
The principle of copy trading is very simple, but it can be hugely effective. Copy trading has no doubt bought countless entrepreneurs into the world of investing who would otherwise have had to sit out. Of course, as they learn and become more skilled themselves, they can end up being the investor that others choose to follow.
Some of the best copy trading platforms out there include ZuluTrade, eToro and Darinex. You can find some useful reviews for each of these platforms online if you’d like to know a little more about them first. It’s important that you choose the right platform for you and understand exactly what you will be getting into before you get started.
Automated copy trading means making every trade that another investor makes automatically. You can either copy the exact trades that they make, or you can copy their strategy, provided they have made the necessary algorithms available. With fully automated trading, trades happen automatically and without any input from the user.
In order to use automated copy trading, the investor needs to have complete confidence in the targets that they have chosen to mirror. Obviously, if you are copying the investments of someone who isn’t making very good moves, you will suffer for it financially.
Not everyone is comfortable handing over total control of their investments over to an automated service. Some people want to retain the final say over an investment and to know that they are in complete control of their finances at all times. For these investors, semi-automated services are a better option.
A semi-automated copy trading setup will alert the user to any trades that their target makes, but it will be up to the trader to pull the trigger on the trade. Without input from the user, the trades will not be executed. You can close an open trade whenever you choose, or you can wait for the target to close their trade.
The biggest advantage of copy trading is that it enables investors who would otherwise not be able to invest in stocks and shares to do so. Copy trading can’t replace the need for some kind of investment capital. However, it significantly reduces the knowledge and experience barriers that prevent beginners from instantly flourishing as investors.
If you mirror the right investor, copy trading can earn you some pretty huge profits without you having to do anything at all. Of course, these unicorns are rare and copy trading does not entirely remove the element of inherent risk that investing involves. However, copy trading is an effective way of mitigating the risk and reducing your odds of making bad investments. But again, this will depend on the trader or traders that you choose to copy.
Copy trading can enable investors to do more than simply copy trades. It can also be a very powerful learning tool, providing deep insights into how individual investors work. Anyone who is adept at analyzing data, interpreting graphs and charts, and using this information in order to formulate strategies of their own will benefit enormously from the potential that copy trading offers.
While copy trading involves the investor following the moves that others make, this doesn’t mean that they are not in control of their investments. By using a semi-automated service, the investor still gets to make the final decision and will remain firmly in control of their investments at all time. Fully automated investing is a better option for those who just want a fire and forget method of earning money from investing. However, the risk is higher when this method is used.
Copy trading platforms are a godsend for investors who want a way of investing in stocks, shares, and the forex market while minimizing their chances of losses. Copy trading is not a get rich quick scheme; nor does it guarantee that you will make profits on your investment. However, you will find investing through copy trading much easier, while still getting the chance to improve your own investment strategy.