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Copy Trading helps in placing successful trade orders by copying a trading expert’s trading behaviour. It can be considered as a form of portfolio management where you look for other forex traders that have a good track record and then emulate their trading moves.
In this article, we discuss what Copy Trading is and how to copy trade a currency pair.
What does Copy Trading mean?
Copy Trading is a trading method in which you copy and paste trades on the basis of the exact movements of expert traders to place successful trading orders. It can help beginner-level traders in reaping higher profits by following skilled traders.
So, if the trader you are copying buys 50 units of USD/EUR at an exchange rate of 2, you copy their moves exactly and place the same order. If they move forward to invest another 10% of their portfolio’s value to USD/JPY, you do the same.
As a successful copy trader, you need to copy each and every move of the expert trader that you are following. Forex Copy Trading also allows you to choose the amount you want to invest and lets you enter or exit the market as per your own will if you decide that you do not wish to follow the trader anymore.
Benefits of Copy Trading
Saves time
Since Copy Trading is all about directly copying all the moves of an expert trader, you do not have to spend time analysing the markets and monitoring the currency pair price movements.
Increases financial familiarity
Through Copy Trading, beginner traders can familiarise themselves with how the financial markets work and how to enter and exit trades. By copying an expert trader, new traders can learn how to limit their risks in the market, and in turn, become more confident.
Allows trade customisations
Copy Trading provides flexibility on what and how much you can trade in order to fit different amounts, risk appetites and accounts.
With Copy Trading forex, you can customise specific trading parameters while copying the trading behaviour of an expert trader. This means that you can place copy trades as per the trader’s behaviour but set your own trade volumes, and put stop loss and exit orders as per your personal preference.
Provides investment opportunity even with limited knowledge
One of the most significant advantages of Copy Trading is that it allows you to invest in the forex market even with limited knowledge. To begin Copy Trading, you do not have to study the market and each instrument associated with it in-depth.
Instead, you can follow the trading strategies of experienced traders step by step with a certain level of personal research conducted on your end. As you start following the expert traders’ moves and study them closely, you eventually gain deeper market knowledge with time.
Enables investment diversification
With Copy Trading, you can choose a number of different traders trading different currency pairs through different trading techniques. This helps maintain diversity in your trading portfolio with respect to the type of currency pair chosen, risks associated with the same, and profit targets. By following different expert traders, you allow yourself to trade several timeframes and strategic approaches and create an overall balance within your portfolio.
What is a Copy Trading example?
Let us assume that you are following trader A for your Copy Trading technique. Trader A places a buy order of 5,000 units of EUR/USD at 2. Copying the same move, you also place
a buy order in EUR/USD at 2, but for 1,000 units as you do not want to trade as big of a volume as trader A.
After a few hours, trader A exits this trade and places a long order for 2,000 units in USD/JPY at 1.5. You follow trader A and exit your previous trade. Your trading step is followed by placing a similar long order in USD/JPY at 1.5 for 2,000 units, and you wait for trader A’s next move. The trader decides to hold onto this position until the next trading day, and that is why, so do you.
Trader A then proceeds further to place one last short order for USD/AUD at 1.7 for 1,000 units before the trading day closes. You follow his trading order and place a short order as well, but only for 500 units in USD/AUD at 1.7 before the trade opens the next day.
Each trading behaviour is followed the exact same way with a few customisations based on the trade’s size and stop loss/limit orders if needed.
How does Copy Trading work in the forex market?
- Analyse different traders and their trading techniques in the market, and select the one who matches your trading goals in the closest way possible. You can choose these traders by using a filter tool that the forex trading platform provides and lets you decide from the available traders.
- Decide the amount you want to invest and how you wish to segregate the amount amongst different traders.
- After deciding the amount, the trading platform automatically replicates trades and strategies followed by the chosen trader(s) in your trading account.
- If you like the results the trader is reaping, you can add more funds and continue Copy Trading.
- Pay the brokerage fee on the trades as you would usually, and share the profit percentage with your Strategy Manager when your trade makes a profit. A Strategy Manager is someone who manages your Copy Trading processes.
Copy Trade forex to place orders based on expert advice
Copy Trading is an incredibly sought-after technique that helps beginners traders place orders based on experienced investors’ trading decisions.
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