i. Copy trading literally means copying another trader’s trades.
ii. Copy trading platforms allow you to subscribe to traders by paying a fee.
iii. You need to research before signing up for any trader’s strategy and start copy trading.
iv. Copy trading is not a get rich quick scheme
What is copy trading?
The meaning is hidden in the name itself. Copy trading is basically copying someone else’s trades and making a profit.
Consider Trader A with a trading strategy for a particular financial asset. This strategy or system has been tested vastly on historical data as well as forward tested in the live markets.
There is another person, Trader B that has no knowledge about the financial markets but he wants to participate in it and earn from it.
Trader B does not want to spend the time to learn and practice this skill of financial trading but wants to fasten the process.
He then lands on a copy trading platform where he can search for traders with a strategy, like Trader A, and can take the exact same trades.
Through such copy trading platforms, a newcomer in the financial markets can capitalize on price movements by simply replicating the trades taken by experienced individuals.
In order to do so i.e. to copy and take the same trades as the experienced traders, individuals have to pay a certain amount as a fee to avail the service.
The traders are providing a service i.e. they are sharing their trades with individuals and helping them to reap the benefits. These individuals are in return paying the traders for availing their service.
This activity of copy trading has its own fair share of pros and cons and it is highly advised that individuals get into it only after taking informed decisions.
Copy trading platforms
I believe that by now you have a fair idea about this activity of copy trading and you are still reading because you want to participate in this activity of copy trading.
Copy trading platforms can be seen as social media platforms. Social media platforms have a basic principle, to connect people. So does a copy trading platform.
A copy trading platform would connect a trader with a strategy with an individual that is looking to copy trades.
Hence, traders would list themselves on these platforms, and individuals will subscribe to the strategies of these traders by paying a fee.
Now, there are several copy trading platforms out there but it does not mean that all platforms are legit.
Just like broker scams, copy trading scams are also a thing. There are several platforms for copy trading that are just there to scam people.
But lucky for you, we have shortlisted the best platforms that you can sign up on and start copying trades.
Top copy trading platforms:
i. IX Social
iv. Zulu Trade
v. Ava Trade
These platforms are not listed in a serial order indicating the best or worst. Every platform has its own uniqueness and it is upon the individuals to narrow down on one platform and go ahead with it.
Signing up on IX Social
IX Social is a copy trading platform developed by INFINOX Capital, which is a reputed and regulated FX and CFD broker.
There are several copy trading platforms and we have also mentioned a few. IX Social is worth a shot as it has a slight upper hand as it has more social elements than its competitors as well as it has a reputed broker backing its copy trading activity.
IX Social is a free platform and can be downloaded from both, the app store for IOS users as well as from the play store for Android users.
Visit www.infinox.com for more details.
Follow these steps to sign up on the IX Social platform and start copy trading right away.
Step 1 - Download the IX Social app from the app store or the play store.
Step 2 - You will have to enter some details about yourself that include your name, email address, date of birth, and phone number.
Step 3 - You will then get a short questionnaire that has to be filled before you move forward. It consists of basic questions regarding your trading experience and goals.
Step 4 - You will receive a 6 digit code sent through SMS on your registered phone number and you have to enter it to complete the process.
After completing these steps you are officially a part of the IX Social community and can use the platform seamlessly.
You can manage your account and set up your personal profile through the Accounts section. You can upload a picture of yours and write something about yourself for the IX Social community to know more about you.
You can connect your trading account along with the IX Social account you have set up. If you do not have a trading account then you can always open one with INFINOX.
Visit the INFINOX website and fill out the form for opening a live account. If you already have an account with INFINOX then you can always link it with the IX Social platform.
You just have to enter your account and you are good to go.
Now that your account is completely set up, you can start copying trades but first, you need to choose a trader whose trades you will copy.
Before you finalize your decision you have to fill a suitability form that checks whether the objectives of the trader you have chosen match with your objectives.
After you have selected your trader you just have to enter the amount you can afford to risk on trades and then the platform will do all the work for you.
If you already have a trading account with a broker and have signed up on IX Social as well, you link both accounts through the IX Social app.
You just have to scroll down on your account page on the IX Social app and have to click on the Link an account button.
You will then be prompted to enter your trading account number and password and it's done.
What is the role of a copy trading platform?
Now that we have explored the world of copy trading and mentioned some of the reputed and reliable copy trading platforms, you might have a question in mind as to why even sign up on a copy trading platform?
The short answer, it gives the subscribers a sense of security.
You can always skip the platform and get in touch with traders and purchase their trade signals. But then there won’t be anything that will keep the trader accountable.
You know that the copy trading platform replicates a social media platform, where there are hundreds of traders and individuals have loads of options to choose from.
Hence, there is competition among traders to convince individuals to subscribe to their strategy.
The primary way to convince individuals is by having a good strategy with proven results. The onus is on the traders to provide immense value to their subscribers which in turn will lead to an increase in subscribers.
What can you copy trade?
You can look to trade almost any financial asset on the copy trading platforms. There is no cap on the types of financial markets you can participate in or the types of financial assets that you can trade and capitalize on price movements.
The stock market, commodity market, forex market, futures market, cryptocurrency market, name it and you can trade it.
It should be noted that the copy trading platforms allow its users to trade in any market but it ultimately depends on the trader one subscribes to and which market is the strategy applied in.
How to choose the right market to trade?
Given the options you have for copy trading, it may become a daunting task to narrow down on one particular market to trade. You must choose a market that you are most comfortable with or the one you are confident with.
You will gain this confidence if you know a little bit about it, it’s always good to know a thing or two about the things you are getting involved in.
For instance, if you are a complete beginner and land upon the forex market first, you must have basic knowledge about this market.
This basic knowledge will include market mechanisms, currency pairs, how and why prices move, etc. If you want to learn about the forex market then do check out the blog posts we have uploaded in the blogs section of our website, www.forexmonopoly.com
Now, there are individuals that blindly choose the markets they are to copy trade in. I would suggest not to do so. If you make decisions based on research then you take control of your decision and you will automatically gain confidence.
You can also choose a market after choosing a trader with different strategies for different markets. Or you can first choose your target market and then look for traders with strategies accordingly.
It all depends on how you want things to work and how much effort you put in to make the decisions.
Which trader to copy?
Here we come to the ultimate question, which trader should you copy, which trader’s strategy should you subscribe to. There can never be a definite answer to this question as it is largely subjective.
A trader that may seem good to you may not seem as good to another individual that is looking to copy trade. So, how to narrow down on a trader?
1. Have your priorities set
Before you begin searching for traders to copy, you should first have your priorities set. By priorities, we mean what you seek to achieve from copy trading.
Are you looking to earn a quick income or are you looking for consistent income over the long term? As we mentioned earlier that copy trading is seen as a source of additional income for many individuals.
Now an additional source of income could be short-term as well as long-term. It all boils down to what you are looking for and what you have planned for.
Once you have an answer to this question you move on to your risk tolerance.
2. Have your risk parameters set
Are you comfortable with risking more in order to have higher gains or are you risk-averse and are happy with less gains and less risk?
You should also take into consideration the drawdown percentages that traders’ strategies will have.
If you don’t mind having large drawdowns then you can go ahead with a trader that trades in a riskier manner. If you are uncomfortable with drawdowns then you can always choose traders that trade with low risk.
It should be noted that drawdowns are not always because of higher risks, it could also be because of changing market conditions.
We cannot control the way the market behaves, but we can always control the risk we are to be exposed to in the markets.
3. Choose only those traders that fit your profile
Now that you know what you are expecting from copy trading and that you have defined your risk parameters, you can search for traders that fit your objectives.
You should know one thing that you have plenty of options, there are literally hundreds and thousands of traders on the copy trading platforms.
Each trader will have their metrics based on which you can judge them. Traders will have different strategies that you can choose to copy trade. I cannot press enough on the importance of having your priorities set right.
If you do not know what you want then it will be very difficult for you to choose. And even if you do manage to make the choice, there is a high possibility that you may not have a good experience down the line.
How to effectively copy trade?
Let’s assume for instance that you already knew about copy trading, signed up on a copy trading platform, chose a trader to copy, and have started copy trading full-fledged.
It is noticed that the individuals that participate in copy trading as doing so blindly i.e. they are actively participating in this activity.
Once you choose your trader and have your copy trading account set up completely, every trade that the trader takes automatically gets placed on your account.
Due to this, copy traders get into a relaxed mindset and all they think about is stacking money without doing anything.
Instead of passively copy trading, I would suggest you actively copy trade.
1. Put in the efforts to choose the trader
Active copy trading starts with performing your research before you choose a trader. You should scrutinize every single detail of the strategy and try to verify their results.
Ask them for their historical results and data of their backtests. Ask them about their trade plan and how they look to manage risk.
If possible, you should even try and get in touch with the trader and bombard them with all types of questions. If they are legit, they will answer, if they are hiding something then there will be discrepancies in their replies.
The more your research about the trader and their strategies the more confidence you gain. Confidence is very important in this field of trading, hence you must do everything and anything for it.
2. Don’t sleep on the trades
Every trade that the trader takes and that gets copied in your account, shouldn’t just be left there as it is. As copy traders, you should understand the trade and see that it is according to the strategy that the trader uses.
You should try and understand the rationale behind the trade. Doing so won’t just help you to understand what planning goes on before the trades are taken but can also allow you to understand and gain knowledge about the price behaviors.
If you actively observe the trades you can develop the skill of trading and can learn while you earn through copy trading.
What I intend to convey through this is that you shouldn’t be completely dependent on the traders. You can always choose to be involved in all that happens rather than being at the mercy of the trader completely.
I can ensure you that if you follow these two steps then you will increase your chances of success in copy trading by multi-folds. All it takes is some efforts from your end and you can avert unnecessary losses.
Things you should know before starting copy trading
Even if you are someone that has just come across copy trading or has already made up their mind as to getting into copy trading, I urge you to read through this. Copy trading will not build massive wealth for you.
Do not get into copy trading or even self-trading with the expectation that you will build an insane amount of wealth. Also do not have the expectations that you will get rich in a short period of time.
Trading is a serious business of making small profits in the short term and compounding it in the long term to create wealth. In trading, going slow is going fast.
You should also be aware that no strategy will work all the time and that every strategy has its peaks and its lows. There will be times when you will lose money and it shouldn’t discourage you.
Do not get affected by short-term losses and start jumping from trader to trader and from strategy to strategy. If you have performed your due diligence properly before selecting the trader, then you will have gained confidence in the strategy.
Stick with this confidence and let the probabilities play out and you will end up on the green side on your PNL.
When are you starting your copy trading journey?
Let me know your experience of copy trading and how this blog post helped you make your decision. If you already are into copy trading then do mention some tips that beginner copy traders should follow to increase their chances of success.
Do share this blog post with anyone you know that’s planning on getting into copy trading and allow them to find everything they may need to take the leap in one single blog post.
If there are any questions you have then do let me know through the comments sections and I will get back to it at the earliest.
Also, let me know if there are any topics you want a blog post on particularly and I will make sure to work on the same.