Have you ever wished you could copy the trades done by a more experienced trader and reap the benefits of their superior skills and instincts? If you are using a trading platform online, you can achieve this by engaging in copy trading. Of course, when you copy someone else´s trades, you will copy both their wins and their losses, so you are always risking your money. Just as with ordinary trading, you should never do copy trading with money you can not afford to lose.
Copy trading is easy today because many of the popular online trading platforms come with built-in tools for copy trading. That way, you can give the system permission to automatically copy trades – you don´t even have to be logged in to your account when the actual trades happen. This means traders can be copied extremely quickly. If you would have to log in, check out another trader´s actions, and then decide if you want to copy them….the opportunity to make a profit might already be gone, and you might end up the opening or closing a position at an inopportune moment.
Do you have to risk a lot of money to do copy trading?
No, copy trading is available at all levels, even for micro traders.
On many platforms, you can elect to copy how a trader opens and closes positions, but with smaller or bigger amounts of money, to suit your bankroll and risk-willingness.
Is copy trading available on MT4?
Yes, copy trading is available for traders using the popular third-party trading platform MetaTrader 4 (MT4).
Is copy trading available for cryptocurrency trading?
Yes it is. You can for instance take a look at Coinbase and Binance.
Copytrading: How does it work?
If you want to carry out copy trading, you (“the follower”) connect a part of your trading portfolio to another trader´s (“the master”) portfolio. When that trader opens and closes positions, that will happen in your portfolio too – within the parameters set by you. Exactly how much you can tinker with the parameters depends on which platform and copy trading system you use.
Copy trading can be carried out through a third-party software solution, or you can use a platform where tools for this feature is built-in.
I want to follow a master who uses another broker, is that possible?
That depends on the circumstances. The big third-party trading platforms MetaTrader 4 (MT4) and MetaTrader 5 (MT5) will connect followers and masters from a wide range of different brokers.
Be aware of execution delays
When a master opens or closes a position, the action will be mimicked in you account as quickly as possible – but there will always be some delay. Exactly how long the delay is depends on the circumstances, and there are also some providers that are known to have shorter delays than others.
In the fast-paced world of trading, minimizing the delays can be of imperative importance, especially if you are doing daytrading. If you are a long-term investor following another long-term investor, a few seconds here and there will make less of a difference.
Using copy trading to diversify
Some experienced traders use copy trading as a method for diversification. If you make 100% of your investment decisions yourself, down to every minute detail, it is easy to end up in a rut of same-same. You have your own preferences, bias, etcetera, and that can lead to poor diversification. Selecting one or a few well-vetted masters and following them can help you bring some fresh ideas into your overall investment portfolio.
No, it is not, but copy trading can be a part of social trading. Typically, the term social trading is used for a wider range of trading activities that have a social component. Hanging out in an online forum and basing investment decisions on what you find out from other people there can for instance be classified as social trading.