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- What is Copy Trading
- Advantages of Copy Trading
- How to Successfully Copy Trade
- The Rise of Copy Trading
- Who Provides the Trading Signals?
- Copy Trade with AvaTrade
What is Copy Trading
Copy trading is a way to automate your trading by copying the trades of other traders. It is often used by newbies that might not yet know how to trade, with the added benefit of helping to teach them on the way. For more experienced traders, it can enable them to step away from their screens if they need to, as all trades are automated.
The goal of copy trading, like regular trading is to open positions on various financial markets including FX, CFDs on Stocks, Commodities, Indices and Cryptocurrencies, and then to close the position, hopefully once the value of the asset has moved higher. Although, much like trading for yourself, here you can also incur losses too.
This could be a good option for those who lack the time or experience to invest by themselves. For this reason many brokers offer the facility of copy trading. There are a variety of platforms offering copy trading services, and while some are manual, others are fully automated. This enables you to sit back and watch the action.
Advantages of Copy Trading
There are many advantages to copy trading, here we have covered just a few:
- Allows first time traders to familiarise themselves with the financial markets and gain the confidence to trade
- Helps new traders to learn how to trade, by watching the actions of other, sometimes more experienced traders.
- Enables more experienced traders to take part in the market, even when they are too busy, and not able to invest the time and research they should normally devote to trading.
- You can copy trade on various instruments including foreign exchange, stocks, commodities and more.
- Creates a community of traders, beginners and experienced alike, who can exchange ideas, strategies and endeavour to improve their trades together.
How to Successfully Copy Trade
Here are the steps you should take to copy trade.
First, you will need to select a broker to partner up with. Choose a regulated broker like AvaTrade that offers you security, a wide selection of assets and customer support.
Now its time to open an account on an automated platform. Here at AvaTrade, we offer well-known options like ZuluTrade and DupliTrade.
Once your account is active, you will see a list of signal providers along with their stats. This usually includes P&L, and risk profile. Select the person/people that best suit your objectives.
Copy investing, or mirror trading became very popular with investors worldwide, mainly because many early adopters have had enormous success and were able to boost their trading skills and profitability with zero effort. Copy trading enables novice investors to do just that. They don’t need to know how to analyse the markets or how to interpret forex signals or indicators.
Novices are using other investors’ abilities and thus increasing their own success rates. Also, copy trading can be used by experienced traders too, as a way of learning new trading strategies from others, and by that, increasing their success in the online trading market.
If you would like to start investing in the stock market but do not have a lot of experience, or you are a seasoned pro who would like to gain insight into the analysis of others, using copy investing / mirror trading could be an excellent place for you to begin.
The Rise of Copy Trading
To begin we need to establish that there are two main types of traders, those who attend seminars, attempt to compile strategies, follow all market trends, and enjoy ‘expert-trading-fees’. Then you have the other group that want to make money with as little input and effort as possible. For the latter, mirror or copy trading was created and has suited many as the perfect solution.
The growth in the past 5 years of copy trading has been exponential, for its main reason is that many traders ‘trust’ this system, and have a comforting feeling that they are not trading alone. AvaTrade offers you popular signal providers that are the best in the business.
Copy trading is not only for the unexperienced, a lot of expert traders use copy trading as a means of market research, it saves time and could be part of a new strategy that could be implemented and profitable.
Social Trading Vs Copy Trading
Copy trading is considered a form of social trading, but the two trading methods have some differences.
Copy trading ties up your account with another trader in that their positions are automatically replicated in your account. If they turn profits, you win; and if they lose, you lose. Copy trading is more passive because the trader does all the work you are copying, and in most cases, the process is entirely automated.
However, some platforms and copy trading apps are semi-automated, but you are only limited to deciding which trades you wish to copy. Copy trading is generally ideal for beginner traders as it allows them to trade way beyond their level of experience or expertise. Some of the significant downsides of copy trading are that it inhibits learning, and traders can suffer huge losses if they follow unsuccessful traders.
On the other hand, social trading is a broader strategy that incorporates social media into investing. The focus is on the community, with traders able to interact and share and get notified of each other’s trading activities.
Some of the features that a social trading platform may include message boards and chatrooms to share trades and talk about strategies, customizable social news feeds that update investors on the activities of their favourite traders, as well as comprehensive access to trader statistics, such as portfolio, risk score, their personal news feed, as well as fail/success ratio.
Social trading allows investors to learn and contribute to the community, and it provides access to numerous investing resources. However, it is more engaging and time-consuming than copy trading, and investors may get caught up in the ‘social media’ aspect and miss out on great opportunities in the market.
Both social trading and copy trading are useful trading strategies. It is, however, essential to select a strategy that suits your trading needs and preferences at any given time. AvaTrade offers a range of solutions, including a social trading app and copy trading platforms. It is vital to select the most comfortable one that meets your trading needs and preferences.
Who Provides the Trading Signals?
AvaTrade uses top quality sources for its copy trading. These parties include hedge funds, expert brokers, and money managers. This means that if you use copy or mirror trading with AvaTrade, you are essentially gaining valuable access to seasoned traders, allowing you to copy their trades and benefit from their experience.
Taking advantage of this trading strategy can be highly lucrative. In fact, many social traders, new and experienced, have had the opportunity to gain direct access to the top traders on the platform and have increased their trading success significantly.
Copy Trade with AvaTrade
We offer you a good choice of some of the most well established copy trading services. We also collaborate with signal providers to get you market alerts and trading notifications.
Here are the products we offer:
- ZuluTrade – With a large variety of signal providers to choose from
- Duplitrade – Easily and conveniently copy trades from multiple signal providers
- AvaSocial – Connect with your peers and automate your trades. Perfect for both beginners and advanced.
The combination of AvaTrade’s global reputation with the best signal providers, gives traders the security in knowing that their trades are in the safe hands of some of the best traders.
What are Trading Signals?
With trading signals, you receive notifications which are like suggestions of what to trade, when to enter or exit the trade and what stop loss or take profit orders to implement. You may receive them by SMS, email or through a dashboard.
Of course, it’s important to use a signal service that gets more successful than unsuccessful trades. However, like all things related to trading, there is always the risk of losing your funds, as no one can read the future. Usually Signals are generated on the basis of a variety of technical indicators, especially the strong signals.
You can of course create your own signals, by using technical analysis and implementing studies and indicators on to your trading charts.
Who Are Trading Signals Providers?
They can be identified by either humans or by algorithms, which are like pieces of code programmed to identify signals, when ample market conditions are reached.
Here at AvaTrade we use tried and tested resources and services for our signals and copy trading products. However, once again remember that all trading comes with the risk of loss and you should only trade with what you can afford to lose.
Our signal creators include hedge funds, expert brokers, and money managers. This means that if you use copy or mirror trading with AvaTrade, you are essentially gaining valuable access to the minds of seasoned traders. This allows you to copy their trades and hopefully benefit from their experience.
The combination of AvaTrade’s global reputation, coupled with some experienced signal providers, gives you the security in knowing that you can trade or automate your trades with a reliable broker.
Copy Trading main FAQs
Do I need prior trading experience to engage in copy trading?
If your plan is only to follow and copy other traders there is no experience required, although it can be helpful in analysing and selecting a good trader to copy. In reality it is often the traders with no experience who like to use copy trading. It can be a good way to begin growing an account, and if you take the time to analyse the trades being made by those you follow it can also be a very good way to learn about trading too. If you’re a new trader and are worried about losing money with copy trading you could always try it with a demo account first before funding your account.
Is copy trading too risky?
If you take the time to identify good traders to copy you aren’t taking any more risk than when trading your own account. That is to say trading is inherently risky, and there is always the possibility that you will lose money. Also note that the past performance of a trader is no guarantee of their future performance, so even if they’ve been profitable for three years running, they could have their first losing week right after you decide to follow them. As always, never invest more than you can afford to lose.
How can I find good traders to copy?
While it might seem tempting to copy the trader with a 300% annual return, in general these traders are taking on far too much risk and eventually will blow up. Instead look for traders who have at least 1-year trading history and a return somewhere between 10% and 30%. The trader should also be active enough that they are placing a minimum of one trade per week. This ensures that they are trying to grow their trading base rather than just locking your money in a single trade. If you want to spread out your risk you can spread out your copy trading between 2-4 different traders.
Open your copy trading account with AvaTrade today!