Copy trading has been one of the most popular trading strategies in the market for years. But is it still popular in 2022?

Copy trading in 2022

Copy trading has been one of the most popular trading strategies in the market, particularly in the early 2010s when the concept was first popularized by several big platforms like eToro and ZuluTrade.

By using special platforms for copy trading, novice traders can just invest some money in a professional trader and leave the rest to the expert's strategy. It's often considered a great way to earn passive income at a pretty affordable price.

However, many experts believe that the appeal of copy trading is slowly declining. Is the notion true?

Well, it's not completely true because copy trading has had a good performance until now and so is able to maintain its relevancy. So, what was the performance of copy trading like in 2022?

 

Copy Trading in 2022

Although many people believe that the popularity of copy trading is declining, most copy trading platforms are actually performing very well these days.

In 2022, some copy trading providers are:

  1. eToro: a well-known broker that offers a social trading platform where users can copy the trades of successful traders. They provide a wide range of financial instruments and a user-friendly interface.
  2. ZuluTrade: a social trading platform that allows users to follow and copy the trades with customizable risk management settings.
  3. Darwinex: a broker and investment platform that provides a copy trading service called "DarwinIA."
  4. Myfxbook: primarily a forex community and trading platform, it offers a copy trading service called "AutoTrade" and enables users to copy the trades of experienced forex traders.
  5. NAGA: a social trading platform that allows users to copy trades with a user-friendly interface, a wide range of trading instruments, and additional features like social networking and gaming.

According to a report, the social/copy trading industry is projected to experience significant growth, with a compound annual growth rate of 7.8 percent. By 2028, the market size is estimated to reach $3.77 billion. In 2021, the industry had a market size of $2.2 billion.

eToro, for instance, closed the last quarter of 2021 with a net profit of $304 million, which was 85% higher than the previous year. In addition, their net trading income surged by 50%.

ZuluTrade, another popular copy trading provider, seems to be doing great as well. Last December, the platform was acquired by the Finvisia Group and now it focuses on business expansion, obtaining regulatory licenses, and adding new features.

A German copy trading platform NAGA also ended 2021 with a huge profit. By the end of the year, the company earned €55.3 million in revenue and made another €18 million in the first quarter of 2022. NAGA is now actively gaining more regulatory licenses and improving its crypto services.

Even so, there are still a few concerns regarding copy trading in 2022. One of them is about regulation. Copy trading is now classified as normal trading activity, but the regulators might change the rules at any time.

If the authorities decide to change their stance and consider copy trading platforms as unregulated entities, then the future of copy trading might be at stake.

This is why some experts like Charles Qi, the CEO of Stockpick, believe that copy trading providers must stay out of the boundaries of regulated investment management as copy trading won't be economically viable if regulated as investment managers.

 

Copy Trading Risks in 2022

The key to copy trading is to accurately predict which expert trader will be successful with their trades and then copy them. However, it's important to understand that even the best traders can make mistakes.

It's just unrealistic even for an experienced trader to keep making profits without a single fail. Therefore, choosing to follow other traders' decisions is certainly very risky. Anything can happen in an instant, and if they lose, you will also lose with them.

According to ZuluTrade, only about 63% of traders profited from copy trading between September 2021 and August 2022

This performance stands in contrast to CMC Markets and Pepperstone, who disclosed that 78 percent and 81.18 percent of their clients, respectively, experienced losses while trading CFDs. This proves that copy trading is not always successful.

So, even though most brokers promote copy trading as a safe way to make money for beginners, it's actually never free of risk.

Another thing to consider is market liquidity. Copy trading can generate a large number of trades that move in the same direction, which may cause a gap in the prices and slippage for traders.

Therefore, this strategy can be unprofitable if you don't know the basics of online trading and how the market works.

After copying traders several times, you might realize that the market is imperfect, and ultimately, realize that blindly following someone else isn't necessarily the best way to make profits.

 

Final Thoughts

Despite all the risks, copy trading remains popular among traders in the market. The high performance of various global copy trading platforms over the years clearly reflects the popularity of the strategy.

With many new traders starting to participate in the market, it only makes sense to expect the copy trading industry to grow even bigger in the future.

That being said, copy trading is certainly still relevant in 2022. Almost every big broker is offering copy trading these days, so the strategy is very accessible from anywhere in the world.

The most important thing is to not be reckless. Copy trading isn't as instant as most beginners would think. You still need to do proper research to examine the data from trader profiles before deciding who to copy. And even then, there's still no guarantee that the trade will be successful.

In the end, it's always better to learn to trade yourself and have full control over your money. Copy trading may give you profit, but it won't teach you how.

Similarly, you can lose money without really knowing what went wrong because you let other traders make decisions on your behalf. So, while copy trading is worth trying, it's still important to understand how to trade properly.

Once you're more confident with your skills, you can start using your own strategy and generate your own money. Perhaps at some point, you can even become an expert and let others copy your trades for some extra money.