Understanding the Basics of Copy Trading

Beginner traders can sometimes lack the confidence to enter the financial markets independently. Copy trading is a popular technique to mirror the trades of an experienced trader. This helps you learn from the experts while exploring the markets. You can take your time finding your sweet spot without worrying about losing out on opportunities. Does leaving your trading decisions to someone else seem daunting? Simplify it by choosing the right copy trading platform and a suitable expert trader.

How does Copy Trading Work?

Developing and testing a trading strategy is effort- and time-intensive. With algorithmic trading gaining popularity, you might want to automate your trading strategy. This takes time to master, given that you first need to develop your trading plan with adequate back-testing. Plus, you need to learn what moves the price of your chosen asset and how to conduct technical and fundamental analysis.

While there is no alternative to strengthening your market and trading knowledge, you need not delay entering the markets if you have access to the expertise of experienced traders on a reliable copy trading platform, such as Blackwell Invest. Some of the key advantages of copy trading are:

• Offers access to experience and expertise.
• Easy-to-use platforms offer customisable copying.
• Lowers time requirements for trading.
• The following experts and exposure to actual trading accelerates learning.

How to Start Copy Trading?

Copy trading requires due diligence. You must choose a regulated copy trading platform and experts whose strategies match your trading psyche and trading goals. Practise diligence at each step, and don’t skimp on research. The guidelines below may help you choose wisely and start copy trading.

Choosing a Copy Trading Platform

Start by choosing a copy trading platform from a licensed and trusted broker. Advanced copy trading platforms host experts and give you access to their performance statistics. These platforms are equipped with tools to help you find expert traders whose trading strategy aligns with your own. You can pick the specific trade set-ups you want to copy. The best copy trading platforms will also allow you to customise position sizes and risk management. Modern social trading platforms may also show how your chosen copy trader’s strategies fares for others like you. You can share insights and collaborate with them to learn how they make their trading decisions.

Look for a copy trading platform with:

• Regulatory licenses and good compliance track record.
• Transparent costs and disclosures.
• Clear information about expert traders’ experience and performance.
• High flexibility and customisability to make the most of copy trading.
• User-friendly interface and abundant educational resources.
• Top-notch personal data protection and security against cyber risks.

Choosing the Expert Trader to Copy

One of the biggest risks of copy trading is following the wrong trader. The expert trader you choose can make or break your trading experience. Here are a few things to look at:

• The trader’s experience and performance track record.
• While their returns are important, assess the leverage and risk they trade with.
• Their expertise with certain instruments and market conditions.

Choose an expert trader with ample experience in the market you want to explore. Remember to tailor position sizes according to your capital availability and risk tolerance. You can choose different experts for different instruments and customise copying to build a diversified portfolio.

Start Copy Trading

After choosing the traders for your preferred asset classes, you can start customising position sizes, risk limits and number of positions. With Blackwell Invest, you can manually choose which trades to copy or automate copy trading based on configurable parameters to maximise the number of opportunities you explore. It also matches you with experts (called masters), lists top performing strategies and shares master’s profile reports enabling effortless selection. 

Navigating the Risks of Copy Trading

After automating copy trading you may be dependent on the expert trader’s performance. The loss of control may affect your trading psyche. Therefore, understanding their strategy and ensuring that their trading plan aligns with your own is critical.

A great technique is to initially monitor trades consistently. Keep an eye on market moves and the expert’s moves to stay updated if they change their trading strategy and make an informed decision of continuing with them or switching to another copy trader.

There is an inherent risk of inadvertently copying unethical trades of an experienced trader. Using a reputed brokerage’s copy trading platform may help you avoid this. These platforms prohibit and monitor expert activities to prevent unethical practices, such as market-making or insider trading.

Some brokerages charge a fee for copy trading, which could offset your gains. Ensure that you understand the platform’s and the expert trader’s terms and conditions clearly and factor all expenses in your trading strategy.

If your chosen market is extremely volatile, there is a risk of slippage due to the delay in the execution of the copied strategy. Server speed and the platform’s copy trading technology stack impact execution delays causing slippage. Therefore, choosing a copy trading platform with a reliable technology stack is critical.

Does Copy Trading Increase Returns?

Your returns depend on the traders you copy. Automated copy trading increases the number of opportunities you can explore in the financial markets. It allows you to explore market opportunities without extensive research or technical analysis. However, your profit or loss potential depends on the accuracy of the expert trader’s speculations and the alignment of their strategy with your trading goals. The bottom line is that no strategy or copy trading technique can guarantee 100% success. Discover copy trading strategies for forex, precious metal, oil, and indices.

To Sum Up

• Copy trading allows beginners to utilise others’ expertise.
• It provides opportunities to trade while learning from expert traders.
• Choose a reputable brokerage with a cutting-edge copy trading platform.
• Customise copy trades according to your trading strategy and risk appetite.

Disclaimer:

All data, information and materials are published and provided “as is” solely for informational purposes only, and is not intended nor should be considered, in any way, as investment advice, recommendations, and/or suggestions for performing any actions with financial instruments. The information and opinions presented do not take into account any particular individual’s investment objectives, financial situation or needs, and hence does not constitute as an advice or a recommendation with respect to any investment product. All investors should seek advice from certified financial advisors based on their unique situation before making any investment decisions in accordance to their personal risk appetite. Blackwell Global endeavours to ensure that the information provided is complete and correct, but make no representation as to the actuality, accuracy or completeness of the information. Information, data and opinions may change without notice and Blackwell Global is not obliged to update on the changes. The opinions and views expressed are solely those of the authors and analysts and do not necessarily represent that of Blackwell Global or its management, shareholders, and affiliates. Any projections or views of the market provided may not prove to be accurate. Past performance is not necessarily an indicative of future performance. Blackwell Global assumes no liability for any loss arising directly or indirectly from use of or reliance on such information here in contained. Reproduction of this information, in whole or in part, is not permitted.