What a forex copy trader should know

What is copy trading?

Copy trading allows you to replicate the trades of another trader in real-time. Simply choose the amount you want to invest, and the platform will automatically execute the same trades as your chosen trader.

With copy trading, you can profit from another trader’s expertise without needing advanced knowledge of the financial markets.

However, you still retain control over your trades, as you can close and open new positions as desired. Overall, copy trading is an easy way to access the expertise of other traders without losing control of your own investment decisions.

The Story of ‘copy trading.’

The concept of copy trading dates back to 2005, when traders first began copying algorithms developed through automated trading. Brokers quickly recognized the potential for systems that allowed users to automatically replicate the trades of other traders, eliminating the need to monitor emails or chat rooms constantly.

This led to platforms like Etoro and Zulutrade, which allowed traders to connect their accounts and follow other traders without submitting their strategies. As a result, the popularity of copy trading has significantly increased.

According to a recent survey, one in three investors believes traditional stock market approaches are too complex and can be simplified by following traders automatically. Additionally, one in four investors said they were considering social trading last year. Social trading platforms are expected to reach $40 billion in 2020, with an annual growth of 96%, and $70 billion in 2025, with an annual growth of 48%.

Investing in People

Like traditional trading, copy trading relies on analyzing graphs and statistics (or at least it should). However, instead of focusing on market movements, we focus on the strategies and success of actual people.

Before copying a trader, it is crucial to thoroughly examine their portfolio to understand their approach, risk management, and overall success. While this may seem daunting at first, by the end of this guide, you will know precisely how to assess and choose a trader to copy.

Some of the best Copy Trading Forex Brokers

  • eToro
  • FOREX.com
  • IG
  • OANDA

How do you copy a trade in Forex?

To start copy trading, you need to allocate a portion of your account balance to each trader (or signal provider) you wish to follow within the copy trading platform.

For example, if the trader you are copying buys 100,000 units of EUR/USD, your account will make a proportionally-sized trade based on your allocated amount. The trade size in your account may be larger or smaller, depending on your initial configuration. It’s a good idea to decide whether you only want to follow new trades or copy any pre-existing positions the trader has open.

You may also be able to configure parameters like the maximum risk you are willing to take for each trader and other controls that can affect your account management. When selecting a trader to copy, it’s essential to consider their historical performance and other statistics like risk taken, average trade size, duration, and frequency of trades.

Some investors choose multiple strategies, but having enough capital and setting the proper risk parameters is essential. Remember, copy trading carries risks, and you should never invest more than you want to lose.

copy trading