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Copy Trading

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Copy trading platform: everything that you should keep in mind about it


Copy trading services, as well as social trading platforms, are becoming increasingly popular in the trading community. If you have seen adverts for online trading platforms recently, no doubt you have heard of copy trading or social trading platforms. But what is it, and how does it operate? In this article, we will be looking at precisely what copy trading is and who it works for, as well as going over which are the best providers accessible.

We will also take a look at the risks associated with copy trading or social trading platforms as well as its benefits to players.

Copy trading is a very strict form of a social trading platform. It’s the practice of repeating another trader’s solutions using automated options and signals. We can admit that it’s trending among crypto and Forex players and is widely accepted within popular third-party websites and services. MT4 is not an exception. However, whilst there are opportunities to profit, there is also a high risk of losing that you should take into consideration.

Do you want to learn everything about this method in advance? How will it benefit you and your company? What should you look for in a provider for a copy and a social trading platform?

We will find out all the details about copy trading and its main options. This article will be helpful for you. So, you can see all the basics needed for you and your firm. It will get you up to speed with this exciting social phenomenon. And we can admit that it’s really as simple as it sounds.

 

What is copy trading?

The idea of copy trading platforms is quite clear. Investors can integrate this technology to copy the real-time Forex or crypto trades. This way, every time they trade, you can fully replicate their strategy in your own profile.

A copy trading platform, as well as social trading platforms, allows users to automatically or manually use another customer’s positions when they are opened or closed. They share their positions using signals via a social network or chats, and their followers can try these offers.

The definition of copy trading platforms is closely linked to mirror trading or social trading, although the difference with copy trading or social trading platforms is that participants are blindly copying trades. They do not utilize the best ones.

Traders can try these positions on different segments, including Forex, stocks, options, and CFDs. You can also implement this strategy using digital assets, including the oldest crypto BTC or primary precious metals such as Gold.

 

Copy trading history

Thanks to precise legal terms and ever-evolving trading technology, many regulators consider copy trading self-directed. In almost every jurisdiction, copy trading is homing due to the client must decide who to copy, even if the copying happens automatically (for each signal).

It is essential to keep in mind that not all providers with social tools provide copy trading.

Here is an interesting fact. Many of the early pioneers in social trading technology started their trading careers as third-party IT specialists. At the same time, some of these firms are still independent service providers (ISPs).

 

How does copy trading work?

Copy trading gives an opportunity to connect a part of your portfolio with someone else’s, where opened positions and future actions are automatically added to your profile. This can be a great way to diversify a portfolio. A user can pick a long-term trader to follow in the stock market.

Alas, copy trading is quite risky, so your players should carry out research, start with a minimum deposit, and find out all the details in advance before investing large sums.

You should also note that some platforms allow their users to have some control over their funds. Some may operate on a fixed system. A strong system will allow consumers to get rid of this technology, but it’s unlikely that they have much control elsewhere.

 

Should you try it or not?

It is essential to say that copy trading needs profile management from your consumers. Therefore, only you can determine whether copy trading is suitable for your players or not. If your customers use it correctly, copy trading can boost their investment portfolio. They can recommend your service to their friends.

 

Is it legal?

It’s crucial to notice that copy trading is legal, but everything depends on your financial license. When joining the financial industry using a regulated brokerage business, your consumers can be sure it is legal and that their trading process, as well as their funds, are safe.

 

Advantages

There are many advantages to copy trading. Here we have covered just a few:

  • Allows first-time traders to learn more about all accessible markets and get ready to trade.
  • It 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 usually devote to trading.
  • You can copy trade on different instruments: exchange, stocks, commodities, and etc.
  • Create a community of traders. Beginners and experienced traders will be able to exchange strategies, improve their performance, and get helpful tips within a group of like-minded investors.

 

Disadvantages

Copy trading comes with risks, like all forms of online trading.

Trades are predictions that a stock or currency will perform a certain way, that it will either increase or decrease in value. As sure as a prediction may seem, no one can claim to be 100% sure how a market will behave.

New traders must be especially cautious when trading using leverage. It’s a valuable feature that brokers offer to boost your trading power using limited sums.

While it could massively increase earnings on profitable trades, losses incurred using leverage could be more than your initial investment.

So, you can win and lose a large amount of money quickly. Since cryptocurrency prices are so volatile, most parts of investor accounts lose money, as well as retail investor accounts lose funds quickly while trading cryptocurrencies. So, you should learn more about the risk-management process in advance, read useful tips from authoritative traders and be aware of the latest trends.

 

As always, never invest more than you are not afraid to lose. Let’s pay close attention to the accessible risks of copy trading.

Market risk. It shows the risk of loss due to price fluctuations. The goal is to generate gains from an increase in the value of the asset being traded. Obviously, there is a risk that the investment will lose its price. Traders can protect themselves from market risk beyond what they expect to lose by using an asset allocation strategy and making a minimum deposit. This means that only a certain amount of funds are allocated to a specific system. By allocating all their assets to a single trade strategy, a trader could face large losses if an unexpected event occurs, and this could wipe out your entire capital.

Liquidity risk. It means that one may not be able to exit positions at expected levels. A trading strategy’s risk management​ method should have historical precedence so the user can see a historical drawdown. It shows the peak-to-trough decline during the life of the plan. This is a significant figure as it lets traders see historically the maximum amount they may be comfortable losing at any given time if they choose to use this type of trading. For example, a copy trader may have a maximum drawdown of 20%. This means that one can expect to lose at least 20% at any point once they start copying the trader.

It’s also helpful for investors to gather information about the products and currencies they are trading. This is because each instrument has a different liquidity level. For instance, it will be much easier for a trader to exit positions in EUR/USD compared to liquidating emerging currency pairs​. When copying traders that focus on emerging market currencies, you can examine the slippage incorporated into their returns, which can be significant during periods of heightened volatility. One should also ensure that the bid/offer spread of the currency pair or security is not eroding the copy trader’s returns. Is the copied trader incorporating fee costs into their returns? Copy traders that transfer often will have elevated costs of trading.

Systematic risk. Emerging market currencies are more exposed to systematic risks. This means that one’s money could get locked up, and the trader may not be able to exit these points. This has happened in the past when countries are overthrown, and capital is locked up and forbidden to leave. While this scenario is very rare, it needs to be included in a strategy where this situation could happen, especially in the foreign exchange market.

 

How to pick up a company?

Fees and commissions

Brokers charge their users in order to make money for themselves. Some brokers do not charge much for commissions on trades, but they take a cut of every trade’s profits.

Inactivity fees are also something worth considering. Brokers penalize traders who leave their accounts dormant without trading. These fees can soar if they are not under control. Many signal providers charge a commission on each copied trade.

Regulation

The regulations that a broker must adhere to depends on the territories in which that broker has offices. Traders should familiarize themselves with all the regulations of a broker before trading with them.

Whether your funds are kept in segregated accounts will also depend on the regulations of the area.

Customer support

Brokers are in charge of keeping your money safe, so you need to be sure that you can get hold of them if something goes wrong. A concern that many traders have is that their broker might not respond to them.

If you want to reach your broker over the phone, odds are you will only be able to during their office hours. Since you can trade with brokers from all over the planet, time zones can make communication between trader and broker difficult.

There are many industry awards that are given to brokers with good customer support.

Before committing to a broker, you should check the methods you can use to contact them.

Deposit and withdrawal methods

Each brokerage will have its own method by which traders can deposit and withdraw money into and out of their accounts.

Some companies, such as eToro, allow users to select withdrawing money through direct bank transfers, PayPal, or credit card payments.

It’s becoming increasingly common to allow traders to withdraw their funds in some form of cryptocurrencies, such as Bitcoin or Ethereum. These are viable options, but we would recommend steering away from platforms where that is the only option.

 

What is Finarm?

It’s a comprehensive financial platform that is accessed by thousands of brokers all over the world. Finarm has no analogs now, and it’s the best website both for brokers and providers. You can find a service quickly and easily for a crypto or Forex brokerage company, as well as provide ultimate solutions for your target audience.

The site makes collaboration between brokers and providers a simple process. It offers a listing with a wide range of providers with detailed reviews and comments from their customers.

For those looking to do their service, Finarm offers so much more than just social trading or copy a trading platform. You will be joining a leading collaborative community of investors — a place to connect, share, and learn.

Finding a provider quickly and easily for a cryptocurrency or Forex brokerage company has been streamlined through Finarm. You will find the most suitable provider among top companies:

  • Legal help;
  • Financial service;
  • Broker setup;
  • Marketing;
  • Software solutions.

In addition, there are upcoming events in the financial and blockchain spheres, the biggest news, and helpful articles.

 

Key benefits

Here are the key advantages that Finarm can provide to your business. Take a look at them:

  • The latest information. It does the hard work for you: its objective research keeps you up to date with the latest offerings from reliable providers.
  • Less work is required. As the choice of providers grows, the amount of research required also grows. Finarm shortens the time needed to find a company relevant to your business needs.
  • A vast range of providers. Its aim is to provide complete market coverage, keep you as informed as possible, and help you with making the right decision.
  • All things are under control. Describe your business only once and exclusively to those providers that match your requirements.
  • Quick and effective. Use our searching tools and find a service in a flash.
  • Great customer support. Finarm supports its community in the best way possible. Its team is ready to help you with everything regarding the search and pick up the best offer for your business.

 

How to find a copy trading partner?

Just imagine, only three easy steps are needed to find the best provider on Finarm:

  • Select a service.
  • Customize your search. Take into consideration all the key details about your firm, available budget, and needed options. So, you will be able to find a provider from a shortlist, accessible on Finarm.
  • Make a decision. Check out reviews, feedback from consumers, and finally, contact the firm. Finarm will connect you and the white label partner, so you will be able to get the service needed for your firm.

That is all! So, you should try it out for yourself.

 

In conclusion

We’re rounding up our thoughts on copy trading. So, does copy trading work? We can definitely say yes. It can be a great trading technique for your investors if they implement risk management, make a minimum deposit, and boost their knowledge.

Consumers can certainly make a fortune using this method, but before starting your own business, you should learn more about accessible options and see if the business is for you or not.

A copy trading platform is perfect if your clients are busy with little time to invest in trading yourself. You can practically pick up a suitable provider and launch the best copy trading platform without the high risk of losing money. Everything will be under control. Your website will be made by experts.

Not only that, but if you are an expert trader who is copied by investors, you can also earn commissions from the trades you make. It’s clear then that if it’s applied in the right way, the best copy trading platform can be a win-win situation for all involved.