As an element of social trading, copy trading is reshaping how you can trade and hopefully make some profit on online stock broker platforms.
You may have heard about social trading. A way of trading online where you can get information and insight from other traders, while also participating in a variety of discussions. So, what happens when you read or follow a particular trader and like the way they analyze the market? What if they are doing well in turning in a profit on a constant basis, and you want to have the same results?
In that case, Copy Trading is the way to go. It takes social trading a little further and enables one trader to copy the trades of others if they choose to do so. In that way, you can rely on the expertise of others and their knowledge about the market, without needing to actively spend a lot of time in it yourself. Done correctly, it offers an enviable opportunity to make your money work.
The Definition of Copy Trading
By definition, Copy Trading is a market tool that enables a person to copy the opened positions and the portfolios of another trader in the financial markets. To put it simply, it is investing your money in an investment fund managed by a financial expert with a good reputation.
It is primarily an extension of social trading, through which you can select a few individual traders to follow based on their social activities and the past history of performances in the market. Once you are satisfied with their return of profits, you can then allocate a certain amount of funds to copy all the financial activities the trader performs in the market.
Theoretically, it doesn’t need the copier to know anything much about the financial market. He or she just needs to check the performance of the person they are choosing to copy.
How Does Copy Trading Work?
To perform Copy trading, of course, you would need to access a platform that allows one trader to automatically copy the trade of another.
They are leading the social trading phenomenon with more than 10 million active traders; thanks to their incredible interface that allows all the traders to communicate, follow and analyze each other’s opinions.
However, different to mirror trading, copy trading doesn’t allow the copier to copy any specific strategies or activities on a specific market like Forex. Instead, you are just allowed to control the fund amount and automatically copy every financial action the copied trader performs on the platform. Still, you can always control and adjust the funds that are allocated for the copying activities and can stop copying altogether if you please. As you would be copying all the actions, you would gain profit or incur losses depending on the movements in your copied investor’s portfolio.