Beginners have used copy-trading for decades. They choose an expert trader to connect with and make the exact same trades as them. It is a symbiotic relationship whereby the beginner usually earns more from their trades and can learn skills from the expert, while the expert trader gains additional capital to trade with.
Nowadays, there are hundreds of copy trading platforms offering an unprecedented degree of customization to users. It allows them to specify the risk level, type of trade, and even how ethical the trades are. Discover in this article how copy-trading can benefit your portfolio.
The primary benefit of copy trading, and the reason that not only beginners use it, is that it can save you time. While conventional traders must sink hours into researching and understanding market trends, under copy trading, you only need to decide the level of risk and the amount of capital you want to invest.
Most copy trading platforms allow you to see exactly what trades are made and when. This allows the experience to be not only financial, but also educational. Suppose you observe a successful trader for long enough. In that case, you may be able to understand the techniques that they use, eventually gaining the knowledge and confidence to conduct your own trading.
Copy-trading does not always mean copying every trade made by the investor you are following. Copy-trading platforms allow you to set parameters, therefore filtering the trades that your chosen investor makes. Only those falling within your required level of risk, size, and ethics will be followed, and you can rest assured your portfolio is traveling in the direction you want it to.
You are also under no obligation to work with one trader. You can acquire a hugely diverse portfolio by copying multiple traders. Many copy traders use this as a technique to spread their investment far wider than they could have if they were trading conventionally. Therefore they can ride the ebbs and flows of the market with greater security. It means that no one trade can be catastrophic.
The final benefit of copy trading is that it removes your emotion’s impact. The sign of a great trader is that they can remain cool and continue to make good decisions even if the market is going against them. This is an area that many beginner traders struggle with as they succumb to the panic of a poorly made trade. In copy trading, these decisions are comfortably out of your hands, and you can relax knowing that the trader you are copying will make the right decisions overall.
Trading vs Copytrading
This article has focussed on the advantages of copy trading. However, many traders still decide to trade the conventional way. This is because they gain much more freedom over the trades they make. You should weigh this against the advantages we have shown today when you decide what kind of trading you want to do.