How Does Copy Trading Work?

Copy trading is a branch of social trading that allows the traders in copying the trades that are being executed by other investors. The trading is done to achieve the similar position of the trader whose trading has been copied. It completely depends on the investor how he is willing to follow the approach of copy trading. This is mainly of two types: manual trading and automatic trading. It is considered the most useful way to use the knowledge of another trader without even losing any control over the consequences. Forextime, South Africa can be a great option for investing in the stock. 

You should follow the steps below:

  • Create an IG account 
  • Research about the preliminary market 
  • Find a social and reliable trading board
  • Copy all the trades in the IG Trading platform 
  • Manage the limits and stops for handling the risk 
  • Detect and close the position 

Now, we will discuss how does copy trading work?

1.Copy-Trading Mechanism

The main work of copy trading is to join a part of your portfolio with that of a chosen trader’s portfolio. By copying a trader, your account will receive all the open trades of the trader. The steps that they are going to take in the future and the plans that they have set up are also copied to your account. You should look for all the necessary information and the goals of the traders. It should match your criteria. Forex trading can help in the filtering of the available traders. The final choice could be filtered from factors such as risk level, profitability, several followers, return on investment, and the funds they manage. Every trader requires a sum to be invested. In most cases, the sum can not exceed 20% of the portfolio. 

2.Adding and Removing Funds

You can choose to increase your funds based on how the trader is handling the investments. If the trade is held successful, the profits could be reached to greater heights. The investments could also be increased if you tend to make larger investments. With a similar approach, the risks will also be higher, In case you are stuck in a losing trade, the risks involved will be also higher. It is recommended to invest less amount in a single trade and always keep the portfolio diversified. Although, you can invest more if you are satisfied with the outcomes but should also be prepared in case of higher risks usually arise out of higher investments. 

3.Individual Trades

After you have started copy trading, you can receive the benefit of flexible control based on different scales on the platforms. Many sites are using a fixed system that allows you to only choose an option about stopping after you have started to trade. whereas some liberal platforms give the flexibility to control and manage funds manually. 

Conclusion

There are many platforms like stock trading and social forex that can allow you to copy trading. The method is very beneficial as it allows you to use other traders’ knowledge efficiently and effectively by way of copying.

Leave a Comment