Investors put their hard-earned money in the trading fields for high profits that they feel would help them manage their luxurious life and be worth the risk they are taking. For investing, they research, study market factors, understand them, analyze them, and enhance their knowledge of the trading world. All this takes a lot of energy and time from the investors. They invest their power for being strong market investors and have a good flow of funds.
However, this is not as trouble-free as it looks; traders have to work hard with the market elements for the perfect decisions. Traders, therefore, have trading styles, strategies, or other tricks that would support their investment. One can have a single strategy or style, while some prefer a mix of strategies for achieving their desired goals. The biggest aid in the above functions that are accessible because of the online brokers, traders can choose them according to their needs and make good investments.
One such trading style or strategy that could be used through brokers’ help is copy trading. It is a unique manner that allows the traders to follow their ideal investor and have their techniques for the results. With the article, we’ll be focusing on what the copy trading strategy is about and how it could be used for profitable investments.
What is Copy Trading Platform?
Copy-trading platforms are many available to brokers; these software applications enable individuals to trade in financial markets. Thus, automatically copy the open market positions and follow the trading style of the expert traders. They can copy certain trading strategies, techniques, tools, analysis procedures, etc., for a profitable investment.
Hence, the trader takes a position in the market; it could be a forex trading market, stock, indices, commodities, or any other. But, traders should be aware that copy trading is not like mirror trading. In mirror trading, the investors are allowed to copy specific trading strategies of experienced traders, whereas, in copy trading, investors link their position of funds with the account of the professional traders.
So, here when a copy trader opens a position, assigns stop-loss, closes a position, or any other thing, this all also takes place in an experienced trader’s account. Although, the two linked accounts of the trader and experienced trader are linked, and thus a proportion is maintained between the copy traders account and the successful traders.
With benefits come flaws; one issue that copy trades can have is that they cannot disconnect from copy trade and manage it freely as per their investing style.
How Does Copy Trading Work?
Copy trade is a technique that is not easy for beginners to execute; they need to understand certain criteria of copy trading. Their copy trading software, copy trading brokers, copy trading accounts, and even automated copy trading could be used for earning good market returns. Investors or copy traders can use any method to invest with another trader.
For example, investors can copy trade all the transactions of the provider; it could be entry, take-profit, stop-loss, or any other. For these, they get notifications for trading and even have automated copy trading. They can use it for trading CFDs or spread batting, whichever they find good. Here, the derivative products allow traders to speculate on the underlying assets’ price movements without ownership.
In addition, copy trading also gives the traders the right to diversify their portfolios. Copy traders can have various ways of earning money from their investments. They need not invest in one instrument and diversify their investments with multiple trading strategies.
Traders can use any copy trading platform like ABinvesting, which has advanced services to provide traders with the best of the market and trading conditions. The forex brokers are many but, ABinvesting forex broker is the best copy trading platform that has many facilities for smooth trading. Investors can have copy trading apps, social trading, trading signals, trade forex, stocks, and other market instruments. Moreover, they help to trade with advanced trading platforms that have time frames, indicators, trading strategies, market research, etc.
The copy traders can use the broker’s services to invest in the copy trading strategy or another financial method. There are several copy trading apps available in the market that have details for signal providers and how to copy traders can use these for a beneficial investment. It has a trading history, technical analysis, and other major financial centers for an excellent investment experience.
So, in this manner, copy traders can execute their investments and make profitable traders out of them.
What is Social Trading?
Social trading is an investment style that is different from copy trading, yet some investors get confused between the two. In this form of trading, investors observe the trading behavior of their peers, the experts, or the traders they want to follow. The trading strategy incorporates copy trading and mirror trading in it. The trading style works simply using the perspective of the investors.
Traders using the trading style can have social trading platforms of regulated brokers where they can carry out research. It is done with other traders that are willing to share their strategies, ideas, and trading performance based on trading history.
Hence, traders can find a signal provider that suits their needs and then can replicate the activities with easy clicking.
How to Choose the best Broker/ Trading Platforms for Copy Trading?
When investing, traders have to be sure of their trading style, their brokers, and what method they’ll be using for successful trading. The brokerage account is also significant for traders as it supports the trading conditions of the investor. For being an excellent copying trader and not to lose money when trading, investors should choose these elements wisely.
Foreign exchange is a market that has high market volatility, and traders can use copy trading for good trading. Copy trading is the most utilised strategy for trading forex because of its high liquidity and trade ability. There is specialized copy trade software for forex trading that assists the client in copying the actions of other traders.
Other than this, traders can also have crypto trading, stock trading, etc., for investing with copy trading platforms. They can have their copy trading account with a broker and make a minimum deposit in the market to trade. However, traders should be careful that these markets have a high risk of losing due to price fluctuations rapidly.
Therefore, traders should have the best broker or trading platforms for copy trading, as they have all the services which will support the trade. Be it forex traders or other traders; everyone can use copy trading for profitable investment.
Risks Associated
Copy trading has a high risk of losing as it is based on copying of other traders that are experts of the field, but if it goes wrong, copy traders may end up losing money rapidly. On one side, it can generate high profits for the client, and on another, it can be a factor to lose money. The strategy used by the investor should also be appropriate and should be able to manage high liquidity and volatility.
Here, we have listed the risks that traders can minimize with their best copy trading platforms and free and paid signals for the platforms:
Copy Trade Market Risk
Market risk or volatility is the change in the price of the market instruments due to various factors impacting the trade. Which traders have their own trading strategies, trading methods, copy trading apps, trading platforms, signal providers, and complex instruments that aid the trader to manage the situation. They use these to accomplish their goal of having high market profits. Although, it is not easy as there is a high risk of losing.
Traders can manage the risks by using market signals or strategies that could minimize the risks and help them predict market changes. However, traders can have an unexpected loss because of the uncertain events taking place.
Liquidity Risk
The liquidity risk is related to the chance of exiting the trade or market due to market change. However, in liquidity risk, it becomes difficult for copy traders or many traders to withdraw back. The risk management technique should be used by a trader to manage this situation. It uses historical precedence to check the copy trader’s maximum historical draw-down.
With this, traders can understand the decline in the trading life of the signal providers. It is an essential part of the risk management technique because, with this, traders can historically check the maximum amount they can afford to lose.
Moreover, the copy traders should also know the instruments and their information for a good investment. Through this, traders can analyse the liquidity of each instrument and make accurate trading decisions.
Systematic Risk
In forex trading, there are emerging currencies that are exposed to the systematic risks of the market. It means that the money of copy traders can get locked, and traders won’t be able to exit the market position. The situation has occurred in the past where the countries were overthrown, and their capital was locked in the market.
Although it happens rarely, traders should be careful and mostly the foreign exchange market traders.
Copy Trading Platform
We have already mentioned ABinvesting broker, a good trader’s choice for copy trading. A regulated broker has negative balance protection, trading strategies, a trading platform that trades automatically for clients, indicators, complex instruments, copy trades, minimum deposit, trading instruments, trading signals, retail investor accounts, and many more services that support the investor for a comfortable and effective investment.
In addition, it is an award-winning broker with being the best forex broker in the world. It has advanced charts, technical analysis, fundamental analysis, the best trading platform that includes order types, indicators, and the appliance of many other research tools.
Other than this, there are other regulated brokers in the market that offer copy trading platforms for market investors. Traders can choose the one that supports their trading goal and help them generate good market returns.
Mirror Trading vs Copy Trading
The two trading styles have a slight difference, where we can define mirror trading as the strategy which mirrors a trading strategy. The investor tries to mimic the trading strategy of the signal providers. The mirror traders at the beginning were interested in the algorithm that was developed and had a trading history. The traders used algorithms that offered strong returns.
So, if we talk about copy trading that it could be said that copy trading was born out of mirror trading. The traders do not follow or copy the trading strategy of the signal provider, but they copy their trade blindly.
Conclusion
Copy trading is a significant trading strategy that investors can use for profitable trading. There are great brokers in the market that have copy trading or social trading facility to assist their clients. They can have the best copy trading platform with knowledge of leverage, customer support, personal manager, trading platform, etc. These minimize their market risks and help them get good returns.
Traders, although, should analyze the broker and its services along with copy trading to have effective and efficient trading.
FAQ’s
How do I open my account with an ABinvesting broker?
Traders can open their trading account with the following process:
- Register
- Information
- Questionnaire
- Documents
- Deposit of funds
How to apply copy trading online with ABinvesting?
Traders can use copy trading by opening their trading account and then downloading the trading platform offered by the broker, ABinvesting. It has MetaTrader4 that has various trading indicators, signals, tools, etc., for market prediction along with copy trading options. Traders can select copy trading and invest in the market.
What are all risks associated with Copy trading?
Copy-trading has three significant market risks which every trader should be aware of:
- Market risk
- Liquidity risk
- Systematic risk
