All You Need To Know About Copy Trading Before Making an Investment

Every trader nowadays wants to make the same profits as a successful investor. That’s where copy trading comes into action. For those who don’t know, copy trading is where you copy the position that’s taken by another well-known trader. 

You simply decide the amount for trading and follow in the footsteps of the trader you’ve chosen. It’s similar to how you copy anyone’s work in real life. If the investors that you follow are successful with their strategies, copy trading could work well for you.

Let’s learn more about it here: 

How Does Copy Trading Work?

Copy trading works in a simple way where both you and the trader’s portfolio get connected. Both of your accounts become replicas of each other, which means, what they do, you do it too. Whether it’s their open trades or related actions, everything is copied to your account. 

In copy trading, you have to first choose the best copy trading platform that provides professional copy trading services. You can test the platform by using their demo account.  

Once done, you must invest some amount of money. Beginners usually start with a small capital at first. As you see good performance, you can always add more money.  

Next, connect your account with the traders and simply relax! All their moves will be automatically copied to your trading account. 

Benefits of Copy Trading

Copy trading has several benefits, including:

• Ideal for beginners: Copy trading is best for beginners who don’t have enough expertise in trading. Although they still need to understand the market, it’s a good first step to being a successful trader. The stock market has already seen a rise in day trading during the pandemic and copy trading could be a help for those amateurs. 
• Time-saving: Thanks to the automation of the copy trading platform, all things happen automatically as per the investor’s parameters. It’s time-saving, plus you don’t have to put the trades manually. 
• Great up-scale: It’s a great up-scale performance for traders suffering from consistent losses. If you find the right investor, you can expect good returns.
• Risk management: As a copy trader, your focus relies on crucial aspects of the professional investor, including their master plan. This helps to assess whether or not the stocks are worth your money investment and ensure a good risk management plan. 
• Control of losses: Copy trading is efficient for controlling losses. If you don’t get good profits from the chosen trader, you can always switch to a new professional investor/trader. 

How Much Money Can You Make With Copy Trading?

Note that copy trading wouldn’t make you rich overnight. But, if you try it out, you can expect 5 to 20% annual returns. Of course, you wouldn’t be getting very high annual returns, like 70%, as it’s totally unrealistic. Your return will depend on the amount that you invest.

For good returns, you have to be consistent in the market and get a thorough understanding of do’s/don’ts. The more you have a grasp on the market, the better for you. You must also stay updated with the earnings, GDP, and other key themes of trading/investing. 

Note that, copy trading has some risks, like capital loss, even if you replicate top-performing traders. So, it’s not recommended to go overboard with your investment funds. Make sure to read the golden rules of investing before starting, so you can maintain your financial stability during copy trading.  

So, Is Copy Trading Profitable?

Coming to where we all started, you may ask if copy trading is profitable. Well, it could be! But you have to be quite thorough while picking your investors to get the maximum returns. 

If you, as a trader, choose an investor who is successful and replicate their moves as it is, you can expect great results. But, as mentioned earlier, tables can turn. 

Professionals can make mistakes, too, and any loopholes can backfire. In fact, the assets/products they are targeting can witness a downfall too. You never know what’s the future of the market and that’s another thing to watch out for.

So, to sum up, copy trading can be profitable. But, the profitability relies majorly on the investors you are choosing. A right choice can do wonders for you, and wrong ones can be rather a blunder for you. 

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