Is Copy Trading for You? Here’s How to Find Out

Have you been thinking about getting involved in copy trading but aren’t sure if it’s worth the trouble of learning a new technique? Many experienced and casual traders everywhere have begun using the approach to empower their bottom-line profits in all markets. If you’re still on the fence and need more information, it’s important to learn precisely what trade copying is and how to do it correctly. Even though it’s not complicated at all, there are still a few essential facts you need to know before beginning.

It’s wise to review a list of helpful tips that can deliver results and help you avoid some of the common mistakes newcomers often make. Likewise, find out the fundamental steps for starting a copy trading account, and be aware of the pros and cons associated with this style of buying and selling. Then, before opening your own account with an online broker who offers it, test your knowledge by using a demo account on your favorite platform to acquire the core skills of the technique. But first, learn the basics, as noted below.

The What & How of Copy Trading

Copy trading, as the name implies, is about following the activities of another person. Some of the best UK platforms as well as independent brokerages that offer the service usually allow new accountholders to choose a particular expert to follow. Typically, you’ll have a choice of several professional traders whose accounts you can mirror by electing to follow their buying and selling activity. Don’t worry if your capital account is small because you can designate a percentage of your available funds to be tied to the copied account’s activities. Getting started is as simple as following the directions on your current broker’s site and enabling copying. After that, you can follow the action in real-time and opt out of the pairing at any time.

Tips for Doing It Right

Consider easing into the practice by watching a few experts for at least a week. See which ones are most suitable to your tastes and style of trading. You can learn about copy trading at AvaTrade and get started right away. Other tips for making the most of the experience include:

• Only commit a small amount of capital to your initial efforts
• Make notes about the different experts to learn how much risk they take and what kinds of setups they prefer
• Try a few different professionals in an effort to get a feel for how styles vary from person to person
• Don’t feel as though you need to follow every trade. There’s no need to set your account to auto. Instead, most brokerages offer the option to select manual when you’re copying someone’s trades. That way, you retain full control.
• Note that most account holders prefer to automate the copying process in order to save time and avoid doing time-consuming research on every transaction.

Steps for Beginners

To get started, find a reputable broker that offers the service. Open an account and fund it. Remember to only use money you can afford to lose. Never put rent money into a brokerage account. Then, enable copying however the broker does it. Sometimes all you need to do is click a single button. In other instances, you might have to fill out a very short form indicating that you want to follow a particular expert. Determine how much of your funds will be used for copying and whether you wish to set the entire process to auto. Even if you choose to fully automate the process, be sure to check activity often in order to monitor results and decide if you want to remain as a copier.

Benefits

The main benefit is that you get to leverage the knowledge of experts. Even if you’ve never made one securities transaction on your own, copying lets you imitate the pros and gain access to their level of profits. Another major advantage is related to the amount of time you can save by not having to do research on stocks, enter positions yourself, or decide where to set stops on individual purchases.

Risks

Every technique comes with a few risks. If you choose to mirror someone else’s activities, there’s a chance you could fall into a sense of complacency. If you are using copy trading to secure your retirement, that may not be the most lucrative practice. That’s why it’s critical to monitor copied accounts at least once per day. Some experts employ unique methods in sideways and trending markets, and you might want to leave the arrangement if things become too complex or illogical for your tastes.

How to Test the Waters

Always test copying by using a small amount of capital. The expert might put 25 percent of available capital into XYZ stock and suffer a sizeable initial loss. After that, they might repeat the same strategy with ABC corporation’s shares and suffer a second significant loss. Testing your two or three favorite experts this way with very small account commitments is an excellent way to study sample cases and see how each person behaves after losses and gains.