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Forex trading seems to be something incredibly difficult. Do you know that it is not necessary to trade on the foreign exchange market in order to have profit? Copy trading has been on the market for a long time. It’s an automatically copying of successful traders’ transactions into your account. It is enough to connect to the service, select an account to copy and get profit.
How does it work?
Copy trading is a kind of an automated trading, where transactions are being copied from one account to another. How does it happen? There are special platforms for transactions copying. You get registered in such a platform, choose a provider of signals and subscribe to his trading signals. After this trader’s transactions are automatically replicated in your trading account.
You can copy all of the transactions in full, or put certain restrictions, such as the number of transactions per day or fraction of deposit involved.
If you don’t like some transaction, you can close it.
Of course, copying of other people’s signals is not free of charge.The trader takes a certain percentage of profit or fix the price of his services for a month. The platform, where the copying happens, also has an interest, such as a percentage of the subscription fee. The platforms for copying, in turn, work with brokers to attract providers and subscribers. The cooperation scheme looks like this:
A successful trader gets registered in the platform for the automated trading and publishes his profile with signals for subscription. So he becomes a provider of signals.
A subscriber chooses a provider for copy trading in that platform or on the broker’s website and subscribes to his signals. The provider carries out transactions on the trading account by his broker, transactions are transfered through the platform to the subscriber’s broker server, and then to his trading account.
Note that you can not transfer funds to the signal provider’s account, as in the case with PAMM-accounts. Trading is carried out with money on your trading account.
It would be better if the amount in your account will be approximately equal to the provider’s balance. For example, if the trader has $ 10,000 on deposit, and you just $ 100, trading will be unreal for you. The trader can open a lot, which will be equal to your entire deposit. On the other hand, some services adjust to scale volume of transactions, depending on the ratio of the provider’s and the subscriber’s balance. Read the terms of use of the service carefully in order to understand what will be the ratio of profits and losses from the provider and you.
Read more about PAMM-accounts here.
Copy trading = social trading?
Copy trading is often confused with social trading. But these terms are not synonyms. Copy trading is one of the elements of social trading.
Social Trading is a relatively new approach to the trading process. It is implemented through special services, resembling social networks for traders, where users can exchange information with other members of community in online mode. Traders are putting there their strategies, chatting with other traders, upvoting.
Newbies are observing the professionals’ actions, and then repeating their deals. Everyone has benefits from experience and knowledge sharing.
How to choose a reliable provider for signals copying?
Here is like on the market – providers show goods with their faces with ratings. The higher the rating, the more expensive subscription for signals. Choose a provider carefully, like a watermelon:
Large and light: Trading history should be long (not less than 60 days), and there must be quite a lot of deals.
Bright stripes: A large number of subscribers says about the trader being in demand.
Hollow sound while tapping: Estimate the trader’s strategy, how many trades per day does he carry out? If he is a scalper, is his strategy not too risky?
Read about the methods of risk management at the link and about methods of money management here.
Dry tail: Maximum drawdown should not exceed 25-30%.
Yellow spot on the side: An average monthly income is 15-30%.
Providers are evaluated according to a rating, and the higher it is, the more signals cost. New providers often sell signals for free to earn a rating. If you have not enough money for signals of demanded suppliers, risk and try to use free ones.
Pros and cons of copy trading
Advantages of traders’ signals copying:
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Earnings without knowledge
You get profit from transactions, regardless of skill level. Professional traders will do everything instead of you. -
Trading style
You choose the signals provider whose trading style suits you. -
More free time
You don’t spend a lot of time monitoring the market. -
Multitrading
You choose the providers of signals as many as you want. In such a case you diversify risks. Thus, you minimize possible losses and won’t lose everything at once. One losing deal may be hedged by another profitable one. Profit also becomes smaller, but the chance of losing all the money decreases.
There only three disadvantages of copy trading:
-
High risks
YForex is ambiguous and changeable. Despite the good profitable trades, the signals provider can once make a mistake and go into minus. Therefore, you should understand all the riskiness of copy trading. -
Professional degradation
When you copy someone else’s deal, you lose your own flair. You monitor the market not so carefully, do not learn from mistakes, do not use technical and fundamental analyses. The brain relaxes without new knowledges, as the muscles without exercises. -
24/5
Trading platform/terminal must always be turned on.
Services for orders copying
So, to copy the signals you have to register on a special website or service designed for copy trading. There are many such sites, the most popular are:
- MQL5 signals;
- ZuluTrade;
- Mirror Trader;
- Signal Trader;
- eTorro;
- xSocial.
Each platform has its own conditions of copying, advantages and disadvantages. We will discuss them in series of articles devoted to services for copy trading. Copy the signals and make money! Wish you successful trading!
by , 2023.04.24