Are you a first-timer when it comes to trading, or did you try your hand at trading but could not reap its benefits like you see others do? It takes a while before a person can turn into a professional trader. There are various concepts that one must know, various tricks and tips that, when known, can come handy in time, amongst other things that lead to these benefits.
It is first crucial to understand the difference between the two main types of trading- social trading and copy trading. Social trading is when traders make informed decisions based on their years of observation and is the best move for professional traders and experts. Copy trading is when traders, both experienced and new alike, can participate in the market by having their trades being performed in accordance with those traders that have already taken a position in the market.
There is also this debate on Forex Social Trading – ?opy trading system and which amongst them is the best for traders. Both have their pros and cons and can be chosen depending upon the trader. Social Trading began gaining popularity since 2005 and has been growing each year tremendously. However, it is now the era of copy trading where traders who wish to trade and invest money with the intention to increase their capital but lack the experience or time to invest by themselves.
This is where brokerage firms such as LiteForex step in. They help such traders play their part by providing them the information required for them to make an investment.
But how do you become a professional in trading using the copy trading method? Let’s find out.
Know the Basics
In copy trading, you invest a percentage of your investment portfolio in a certain trader and copy all their trades in a percentage-based manner. It is always best to have a diverse portfolio because traders, at times, can hit a bad streak no matter how good their profile looks. When such a situation arises, you don’t want to lose your entire investment at one go!
When you diversify, you invest say, about 10-20% of your investment in various portfolios. This way, you don’t lose everything at once. Alongside looking at the traders that you plan to invest in, look at the profiles of traders themselves as well. It is essential that you observe and understand their strategies, how successful they have been, what risk management they display etc. This will help you gauge their future moves and thus decide your moves on the same.
Which Platforms to Subscribe to?
There are many platforms today that help combat the Forex Social Trading – ?opy trading system. However, it is always advisable that you stick to the big and established firms like such as eToro, Zulu, Trade360, or LiteForex that are well known in the market for their brokerage services. These services help you understand the traders you can invest in.
How Does Copy Trading Work?
Copy-trading connects a part of your portfolio with that of the trader of your choosing. This way, all of their opened trades are copied to your account. In the future, too, their actions are automatically copied to your account. Then you are asked to select a sum amount to invest in a certain trader. In most cases, you can only invest about 20% of your portfolio. Say, your account balance is currently 100 USD. Currently, you don’t have any open trades, but you’ve decided that you want to copy a trader.
Upon studying his stats, he looks promising to you, but since this is your first time, you fear investing too much. Therefore, you invest 10 USD, which is 10% of your portfolio. The trader has one open trade, which is copied to your account. 10 USD is a percentage of the trader’s portfolio. If his portfolio is USD 100, then your investment is 10% of your portfolio. If he makes a trade for USD 10, then you will make the same trade, but the money that is invested from your account will be 10% of the money that he invests.
The best part is that you don’t have to worry about these calculations since the system is automated. You can even add or remove your funds depending upon how the trader is performing. If you’re happy with the results, you can try to increase your profits by investing more. It is advisable that investing more is a risky move, though.
You can become a professional in trading when you devote some time and effort to understanding the traders you want to invest in. You need not be an expert to begin or continue trading. As a newbie starting their trading experience, copy trading is the best route to follow. It’s a nice way of making money on the market; however, it’s not without risk. Remember to be careful of two things- one, the platform you choose depending on how much control you want to have over the operations of your accounts. And two, the trader you choose. This is of utmost importance since you will be entrusting a part of your portfolio to a complete stranger.