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Copy Trading Platforms and Strategies

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Copy Trading Platforms and Strategies

Copy trading is the technique of copying another trader’s positions via the use of social media platforms, automated systems, and signals. Copy trading is popular among forex traders and is often used in conjunction with prominent third-party platforms, such as MT 4. There is a good chance of generating profits, but there are also certain risks to be taken into account.

Individuals may replicate another trader’s positions when they are opened or closed, either automatically or manually. Traders broadcast their positions through signals on a social network or forum, where followers may replicate their strategies.

The concept of copy trading is related to that mirror trading, except that traders replicate transactions indiscriminately rather than duplicating only the best techniques.

How to create an account for copy trading

  • To establish a copy trading account, you must first open a live trading account with your preferred broker. Always verify your broker’s regulatory status before trading since this will dictate the degree of security and fund protection offered.
  • Traders must first deposit money into their account before they can make an investment in another account. Depending on your platform, after you get your login credentials, you may need to connect your copy investing system to your real account. Typically, the broker will give instructions on how to do so.
  • After you’ve established your accounts, you may begin duplicating transactions.

Software used in copy trading

Copy trading may be provided through proprietary software or a third-party platform such as those mentioned below, depending on the broker.

MT4 

MetaTrader 4 was designed to enable investors to replicate the trades and techniques of experienced traders. From inside the site, choose the Signals option to get access to free and paid forex signals from leading forex suppliers. 

Because traders are rated according to their performance, it’s fast and simple to pick a service provider and set your criteria. After that, you may begin replicating transactions in both live and demo environments.

MT5

On the MT5 platform, you may automatically replicate the transactions of others in a manner similar to that of MT4. It is not necessary for masters and followers to be registered with the same broker.

Clients choose how much money to devote to mirroring a specific trader and have the option of copying several providers at the same time.

DupliTrade

DupliTrade is a market leader in automated copy trading. Users have the option of scaling up, or down the percentage of transactions they want to replicate. Those interested in selling their trades must go through a thorough audit process, while customers are provided with all the information and statistics necessary to make an educated choice.

 cTrader

Another prominent platform is cTrader. After customers create an account, they may go to the Copy area to learn about various strategies and compare providers’ history, risk tolerance, and costs. Clients choose how much money to devote to mirroring a specific trader and have the option of copying several suppliers simultaneously.

Copy trading strategies

It is critical to evaluate how similar your trading strategy is to the strategies of the service providers you want to imitate. This will assist in ensuring that there is no significant difference in risk tolerance, for example.

Key critical strategic concerns include the following:

  • Risk – Quantify your risk tolerance – how much market volatility are you prepared to tolerate, and what risk management alerts and solutions are you going to implement?
  • Marketplaces – Which financial markets are you interested in investing in? Popular markets include forex, stocks, indexes, commodities, and cryptocurrency. 
  • Static or flexible — What level of control do you want over your capital? Mirror transactions will be quick and hassle-free with fully automated and fixed copy systems. Those seeking more influence and control may choose a more open and adaptable structure.
  • Due diligence – One risk associated with copy trading is that customers may fail to do enough thorough research before investing significant amounts of money. Not only should research providers be thoroughly searched before you join up but also track trade their performance 
  • Leverage – Leveraged copy trading enables you to raise the size of your positions with a modest initial investment. This implies that by replicating the transactions of several suppliers, you may enhance your profit potential.

Pros

There are many benefits to copy trading; the following are just a few:

  • Assists new traders in being acquainted with the financial markets and developing the confidence to trade
  • Allows more experienced traders to participate in the market even when they are too busy to spend the time and research required for trading.
  • Establishes a community of traders, both novice and experienced, who can share ideas and work together to better their trades.

Cons

  • Risk: If a strategy fails, the risk will be transferred to the accounts of those who have followed it, potentially resulting in a financial loss for them.
  • Compromised control: A major drawback of duplicating an account is the lack of control that a trader will have once they begin doing so; traders are basically putting their whole portfolio in the hands of someone they don’t know.
  • Fees: Copy trading may include fees, depending on the broker. Customers often pay a masters’ fee that is set on an individual basis and may depend on trading volume. Additionally, a minimum investment amount may be required. 
  • Not accessible in the US: Copy trading is usually unavailable to citizens of the United States of America owing to the Dodd-Frank Act, which imposed limitations on lenders in order to protect US customers from unscrupulous activities.

In summary

Copy trading is an essential tool for forex traders if they want to increase their advantage in trading. However, you still need to understand how trading works, to help you comprehend the specific trading strategy chosen by your copy trading master. Also, copy trading doesn’t guarantee a profit, and you have an ultimate say on whether to follow the guidance given.

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