Is Copy Trading Worth Trying?

Copy trading is one of the most popular trading strategies for novice traders. But apart from being simple and quick, how profitable is copy trading?

One of the best ways to trade for beginners is copy trading. It is relatively easy, doesn't take much time, and doesn't require much money. With the increasing number of new traders in the market, many brokers try to be more beginner-friendly by offering this feature. But even so, is it true that copy trading is more profitable than other trading strategies out there? We'll find out the answer in this article.

A Way to Trade and Learn

As the name suggests, copy trading essentially means picking a certain position opened by a trader of choice and automatically copy the exact strategy to your portfolio. By using a copy trading platform, you basically copy other traders' performances, whether to copy open trades from that person or start from only new trades that they make.

In other words, you are investing in the growth of a particular trader, so you would want to choose the best traders with the most profitable strategy possible. You can also determine how much you want to invest in a certain trader, which will proportionally determine the gains or losses you will get from their performances.

This feature is helpful for beginners because by copying the open positions from more experienced traders, rookies can learn different strategies they use along with its efficiency and winning rate. It is as simple as picking a trader, putting down your money, and letting the platform copy the trades with your cash.

Is Copy Trading Profitable?

The answer to that question depends on whose trade you copy. When you copy trades, you trust your money for an investment that uses someone else's strategy. Therefore, choosing the right broker is the key to successful copy trades.

Now, remember that each person has different strategies and thus makes different decisions with their trades. So the winning rates are never the same for each trader; one trader might gain a 60% profit a year, another 100%, and another might even make a 30% loss over the same period.

Because we typically can't see the actual amount of money that the trader is investing in a certain position, those percentages matter a lot so pay attention to that when you open the profile of each expert trader.

Furthermore, because there are thousands of traders to choose from, it is important to be able to sort out and narrow the options. Considering the instruments they trade and whether their system benefits you would be best. Also, pay attention if the trader's really capable of making their trades.

A copy trading platform like eToro offers many benefits for it's users. First of all it, allows social trading so that traders can interact and talk with each other.

Another broker that offers copy trading platforms is Pepperstone. Platforms like Myfxbook, MetaTrader Signals, and DupliTrade seamlessly integrate with Pepperstone accounts, allowing its clients to engage in social trading.

FXCM is another broker that is equipped with copy trading platforms. Traders can choose between social trading and Myfxbook through this broker.

FP Markets is also a good example of a broker with copy trading options. This broker provides good social trading platforms and Myfxbook Autotrade as well.

This way, you can ask questions to the experts and join in various discussions on the platform. Some traders may not respond to your questions, which can indicate that they don't care or can't answer because they don't know what they're doing. Check the trader's profile thoroughly before you decide to copy their trades.

In addition to becoming part of a vibrant community, you also gain access to a wide range of assets such as stocks and cryptocurrencies, all conveniently available on a single platform.

A unique feature offered by eToro is the ability to easily replicate the trading strategies of Popular Investors in the cryptocurrency space. With just a few clicks, users can automatically mirror the investment decisions of these successful traders, eliminating the need to construct portfolios or adjust fund allocations manually. This feature simplifies the investment process and allows users to benefit from the expertise of experienced traders in the crypto market.

How Does Copy Trading Work?

After you have figured out how to find trustworthy experts, it is time to learn the smart way of copy trading. For example, trader A gains 10% profit over the next month, and you want to copy his trade.

If you invest $200 to copy his trade, then in the next month, you will get 10% of your investment, which equals $20. It's simple math in which the amount of money you invest is multiplied by the percentage of your chosen trader's profit or loss, which is the estimated result of your copy trade.

Based on the same calculation method, if you target a $1,000 monthly profit by copying a trader, you should invest at least $20,000. At this point, that amount might sound expensive, especially for beginners.

There are two alternatives that you can pick: find other traders who can make more than 10% per month so you can still get $1,000 profit each month with lesser capital investment, or you can lower your profit expectations and adjust it with the amount of money that you can afford to invest.

Conclusion

From the explanation above, we can conclude that copy trading is indeed a great way of trading for beginners. It is simple and doesn't take much time to execute. However, it is not a magical way to earn loads of cash quickly and with minimum effort. It is not a shortcut to be instantly rich only by copying other traders.

Like any other trading strategy, copy trading also has flaws and cannot guarantee that every trade will succeed. The main purpose of this method is to learn from experts while simultaneously making money along the way. Still, always try to remember that you can make money with copy trading only after you make sure of these matters:

1. Be careful when choosing a trader to follow.
2. Adjust your profit expectancy with the profitability of the trader.
3. Always mind the consistency of the trader's performance.

If you wish to educate yourself on trading before building your strategy and trading independently, copy trading is an excellent choice and worth trying. For beginners, trying the demo account before depositing funds in the real account is necessary.