Copy trading: how to mimic the best for profits.
The investment universe can be a confusing space for anyone looking to start trading. Tune in to any of the financial media networks for a few minutes and you’ll see why. From global politics to COVID-19, it seems that anything and crypto copy trading platforms everything can affect asset prices.
But it’s never late to take control of your financial well-being and why can't i copy trade on etoro explore different trading strategies. Several years ago investing seemed too complicated for amateurs. But in 2021, financial technology companies have evolved, making trading available for everyone. And there’s a tried-and-tested investment strategy known as copy trading. First, let’s explain what copy trading is and how it works.
What is copy trading?
Offered by several brokers, copy trading, also known as mirror trading or social trading, allows clients to automatically copy trade cryptocurrency - http://abudabi-binary-option.betiforex.com/?qa=18234&qa_1=qtrade-crypto-pascal-coin-pasc-price, the trades of high-profile investors.
Anyone that wants to implement a copy trading strategy will need to identify someone whose investment philosophy aligns with their own. A broker that offers copy trading will have a list of traders and detailed information on their performance.
Some key advantages of copy trading include:
Build a portfolio modelled on a successful investor’s trades. Understand scenarios where emotional and irrational decisions are made. Build a diversified portfolio across multiple asset classes.
Copy trading is used even by professional investors. A stock picker who wants exposure to cryptocurrencies but doesn’t have the time to research a new asset class could make use of copy trading.
Similarly, a crypto investor seeking exposure to stocks but who doesn’t know where to start could consider a copy trading strategy.
There’s no magical formula on how to copy the best traders. There’s no one-size-fits-all approach to determining what constitutes the ‘best’ trader.
Many are quick to conclude that the ‘best’ trader is the one who generates the highest returns. But, as is often the case, high returns may imply increased risk and a higher potential for large losses. A conservative investor with little room for losses may want to stay clear of traders with unusually large returns.
It’s prudent to carefully research brokers that offer copy trading because specific details vary from company to company.
Copy trading basics.
How does copy trading work? Let’s move into greater detail. As a copy trader, you give up some control over your investments. After deciding how much of your portfolio will copy another investor’s, all of their trades are automatically copied by your account.
You don’t need to worry about the size of your account as the system will adjust accordingly. If the trader you’re copying has an account size of, say, $100,000 and makes a purchase for $10,000 (i.e. 10% of their portfolio) then the system will automatically calculate 10% of your portfolio and duplicate that trade – be it a purchase for $50 or $500.
Of course, you decide if or when you want this type of arrangement to end. If you’re unhappy with the choice of the investor you copy from, you’re free to move on to someone else or quit copy trading.
On the other hand, if you’re happy and want to allocate more capital to be copy traded, it can be as straightforward as depositing more cash into your account.
Copy trading shouldn’t be confused with copy trading signals. There’s a big differentiation between the two – an investor who opts for trading signals will merely be notified of a new trading option via a message or e-mail. Some investors prefer this method as it gives them a final veto over how their money is allocated.
In essence, if you’re looking for the easiest explanation on how to copy trade, the answer is simple: the platform does it for you. However, you should do your own due diligence and keep a close eye on those investors you copy (signal providers) and the choices they make, comparing them with your own investment goals.
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