Copy trading’s key benefits
What does Copy trading mean?
Copy trading enables individuals in the financial market to automatically copy positions opened and managed by other selected individuals. Usually, the copying trader retains the ability to disconnect copied trades and manage them themselves. He can also close all copied positions at the current market price. Copy trading has led to the development of a new type of investment portfolio. To be more specific, this type of investment portfolio ("People-Based Portfolios" or "Signal Portfolios") differs from traditional investment portfolios in that the investment funds are invested in other investors, rather than traditional market-based instruments.
• You can diversify your investments
Diversification of a portfolio is an essential aspect of risk management. This type of diversification is also possible with copy trading. Investors can select between a variety of different traders trading different assets, with different strategies, and over different timeframes. Copy trading allows you to gain exposure to different markets which you potentially would not have looked at before. This can all combine to provide diversity and balance within a portfolio.
• It allows investing with the limited market knowledge
Copy trading allows traders with limited knowledge an opportunity to invest. Following and copying the strategies of professional traders can prove beneficial. Although, it does not completely remove the need to know how the market works and research alongside implementing a solid risk management strategy.
• You can learn how professional traders operate
We also provide investors with the opportunity to observe and learn from more experienced traders. This experience can be an educational one that proves valuable in the long term, especially for beginner traders.
• Can help experienced traders, not just beginners
Copy trading is not only helpful for traders who lack the time to do any trading on their own. Experienced traders may choose to copy someone as a diversification tool.
• You can manage risk more effectively
Copy trading does not make trading any less risky. However, traders can set a maximum drawdown level or define whether they want to mirror the trade size of the master trader or adjust the size of the trade relative to their account size.
• Removes emotion from the trading decision process
Keeping your emotions under control is one of the biggest challenges traders are facing. With copy trading, there can still be emotions involved, but you can rely to a large degree on the decisions of the master trader. If you noticed that you are too emotional in manual trading and close your winners early while letting your losing positions run freely, copy trading might suit you more.
• You can save time
Becoming a successful trader is not an easy task. It requires a considerable amount of time and effort. Copy trading allows you to copy successful traders. You need to ensure you have set appropriate risk parameters that you feel comfortable with to avoid losses that exceed your market structure, as well as fundamental and technical analysis.
All trading involves a degree of risk, and so does copy trading.