What Is Forex Copy Trading? Anyone can trade in the foreign exchange market. Even those with little knowledge of foreign exchange trading. How? By copying operations.
The great thing about this trading strategy is that you win on autopilot. So even if you know nothing about Forex or know very little, you can deal with it through more skilled investors with proven strategies that you can copy. Copy trading is therefore ideal for new investors.
Are you ready to learn more? Then you can examine detailed information about the copy trade that will bring innovation to your life.
What Is Forex Copy Trading?
Copy trading is so popular these days that it has spawned the phrase “people-based” portfolio, which refers to investors investing in other investors or investors rather than trading on their own.
The basic principle is to copy all transactions carried out by a particular investor. When they win, you win. When they lose, so do you.
The mechanism behind the copy trade, though, is not so simple. Trades are made on a percentage basis because you connect only part of your portfolio, not the entire one, to a single investor.
In a way, this allows you to diversify and not put all your money into a single signal provider. It is highly recommended that you invest no more than 20% of your portfolio in a single investor.
Criteria When Choosing An Investor To Copy
One of the biggest challenges of the copy trade is choosing who to copy. There are too many signal / strategy providers on a single platform and many factors to consider.
So we reduced the criteria to six. Still a lot, but enough to give you a good foundation. The first thing you need to do is look at an investor’s profile description. Here you will find all relevant data that you can use to determine the best investor to copy.
You will find the following details on our own copy trading platform Copypip:
Performance charts and more
Proven track record
Check an investor’s performance over the past 12 months or more. It’s better if they’ve been trading longer so you can see their performance when the market is bullish or bearish.
The best investor to follow should show consistent results rather than uneven results. A quick way to determine this is to look at the chart of past performance. If it is gradually increasing, you may be looking at your future signal provider. If there are irregular spikes, look for another one.
Basically, you want to copy an investor who is earning 3% each month for the whole year compared to someone who wins in the first six months and loses in the next six months.
Follow a signal provider that trades with a real account and risks its own money. In such a situation, they are likely to be less reckless in their trading. This also indicates that they are confident enough to take the risks associated with the benefits of Forex trading.
You should also check whether the negative moon in the performance charts is strategic and if there is an error.
A Large Number Of Followers
Similar to social media, an investor with a large number of followers may indicate that they are eligible to copy. You can even make them look like an influencer. If people don’t win, why would they fake their trade, right? You can also get some of those gains.
But you have to check whether followers, or at least the majority of them, trade in “real money.” After all, you’re risking money out of your own pocket.
This also gives you an advantage in terms of social trading. You can tap these followers for trading advice or thoughts and trading strategies.
Copy trading has no risks, but you don’t need to risk losing your money if you can’t afford it. That’s where you need to look at the risk level of the signal provider. High or low?
First of all, check whether Stop levels are set in each transaction that opens, and at what distance to determine risk levels. Do not copy an investor without stop levels, as unlimited levels equate to potential risk.
In Forex, the decrease is the difference between the account and the equity balance, where the equity balance is below the account balance. It measures the biggest loss of an account, so you should check how much of an investor’s account is in a negative state over a period of time. Especially if the same strategy is used, the same decline is likely to occur in the future.
In copypip, the maximum decrease is shown in an investor’s portfolio description. This will help you distinguish one investor from another.
How risk is minimized during copy trading.
Copy Multiple Investors To Reduce Your Risk
Make sure the investors you follow use different trading strategies. If you prefer to close your trades on the same day, or no more than 12 hours, keep track of daily investors.
Observe how an investor behaves during and after a bad trade. If they stick to their system being tried or tested, go ahead.
Most importantly, when an investor changes trading behavior or underperforms, reduce your loss. You’d better off offloading your capital to invest in other investors who are potentially more successful.