What is copy trading?
Copy trading is the process where techniques and positions of successful traders are available to be copied by other traders in the online financial market. Copy trading is usually done in social trading. In here, traders are enabled to copy strategies in as much as it links a portion of the funds of the trader that is copying to the copied investor account.
Copy Trading Broken Down
When the copied traders do something in his account, the same activity is done with the account of the copying trader in accordance with the proportion with the allotted copy trading funds of the copying trader and the account of the copied trader. The copying trader has the power to go alone, without copying any strategy or techniques used by any other trader in as much as he has the power to close the copy relationship.
Copied investors earn from the subscription fees of traders who use his strategy to trade.
Copy trading allows traders to automatically copy every operation done by another trader, the copied trader at that. The trader doesn’t need a fund manager and all he needs to do is to open a personal trading account and connect his account to his personal choice of trader to copy.
Persons Involved In Copy Trading
There are different people and component involved in copy trading. These people have different roles and they are the following.
- The Market – Any kind of trading would be impossible of markets doesn’t exists. For copy trading, the main market used is the Forex Market.
- The Broker – Investing in any market is made possible with brokers. You can’t open a trading account and trade without these brokers. Obviously, in order to do copy trading, you must have a trading account which is acquired through brokers. It is very important that you choose a broker which offers a copy trading platform if you wish to do so as there are some brokers who do not have copy trading platforms.
- The Trader or Signal Provider – In copy trading, the signal provider refers to the trader you will copy. In choosing a signal provider, you are given the chance to observe and evaluate various data and the performance of different traders.
- The Investor – This is you, and most probably, you have your own reason why you want to use the copy trading platform. Your role is to understand how to turn goals and risk management into practical and specific choices.
- The Copy Trading Platform – Without a copy trading platform, your dream to do so wouldn’t be realistic. Copy trading platforms are provided by brokers. There are different types of copy trading platforms, each having their own strengths and weaknesses.
How does it Work?
When a new trade is opened by a signal provider, the same trade is sent by the broker to the copy trading platform. Upon receiving, the investors are notified by the platform. After which, the platform then sends the details of the new trade opening to the broker of the investor. Finally, the broker of each investor will open the order on the trading account of the customer.
Choosing the Best Platform:
It is imperative to select a leading and trustworthy Copy Trading platform when looking to get into Copy Trading. You can choose a standalone platform or an established one having this strategy as an extension.
Here are some of the Best Copy Trading Platforms in the Industry right now
On a reliable copy trading platform, you can simply click on the Copy button given under the profile of the selected trader. It will ask you to select the amount that you intend to invest in every trade. You can set some additional parameters to put a cap on the investments and set your daily copy trading limits. After all these settings, you can enjoy the perks of copy trading
Copy trading, like any other trading, comes with risks too, thus safety and security measures should be observed with trading. It is very important that you consider everything before you finally settle with a broker who offers a copy trading platform in order to avoid getting upset over the wrong broker.
(Your Capital is At risk)