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Trading comes in different forms, allowing those interested in this activity to choose the right trading type for themselves. Now, there are FX brokers providing an option to duplicate trades of others – this process is also known as copy trading. If you are looking to have a portfolio that matches the portfolios of professionals in the industry, maybe you should get into copy trading.
Copy trading comes with pros and cons just like everything else, though. Before you use this form of trading, you should know what it involves so you are sure you are doing the right thing. This post will talk about copy trading and will tell you whether you should do it or not.
What Is Copy Trading?
Copy trading is a strategy where a trader copies another user’s trades. It means tracking that investor’s performance. Someone who does copy trading will pick an expert trader that they follow and copy their actions.
So, let’s say you follow a trader, and he purchases 50 shares of a certain stock. In copy trading, you will also have to buy 50 shares of the same stock. Most people who copy trade do so in order to be successful. They see another trader having amazing success with this trading type – therefore, they want to achieve the same success. So, following the other trader’s example is the best thing to do.
Copy trading can either be done on your own or you can use a copy trading platform. With a specialized platform, you would be able to select a trading activity to copy while the business or trader makes investments on your behalf.
What Are the Benefits of Copy Trading?
Copy trading is a popular trading form because it has a lot of advantages. Knowing the benefits may help you decide if you should get into copy trading yourself. Here is what copy trading brings to the table:
- It can help you network with some expert traders
- If you’re a beginner, copy trading is a great way to start trading
- You can start to make money gradually
- It is a great way to make some passive income
- It saves time as you don’t have to spend ages trying to decide which stocks to trade or trying to analyze the movements of the stock market
What Are the Downsides of Copy Trading?
Copy trading also has some downsides and knowing them will help you decide whether this type of trade is right for you or not. Here are some of the cons related to copy trading:
- You will have to determine which traders are legit and which aren’t, and this can take a lot of time
- It is hard to find the right copy software or platform, as you have to make sure they are legit
- With automated software, you have to keep an eye on the processes and if there are losses, you will have to stop using the software, or else you can lose all your money
Final Thoughts
Before you get into copy trading, you should consider all the pros and cons and determine if it’s the right process for you.
It can take a while to decide which trader to follow, but once you find a good, experienced trader you admire, it will all go smoothly. Not all traders get along with copy trading – so, knowing the downsides will help you decide if you should get into it or not.
