Copy Trading allows a trader to copy the trading activities of another trader. This is done by the use of an automatic system made available on the platform of the trader that you are copying, which is the factor that differentiates it from social trading.
Trading is designed to link the portfolio of the trader (slave) with that of the other trader he wants to copy (master). Once the two platforms are linked, every trading activity carried out on the master’s portfolio will automatically reflect on the slave’s portfolio; the same happens to any other activity that may take place on the master’s portfolio, be it pending order, or closed trades. Consequently, you will make a profit when the master makes profit and record losses when losses are recorded on the master’s account.
All the opened trades on the master’s portfolio will also be opened on the salve’s portfolio. While copy trading occurs automatically, social trading does not take place automatically; on social trading, you will have to carry out the trade copying activity manually.
One of the beautiful things about Copy Trading is that you can decide on how much of your account balance that you want to risk on the copy trading. If your account balance is $1000, for example, you can only risk a maximum of 20% of your balance on copy trading. Consequently, only about $200 of that account will be risked so that your account will not be wiped off in case things go south.
If you now like how the trader manages your funds or you are more satisfied and comfortable with his results, you can then increase your risk level by the increasing funds. Be that as it may, you must understand that the losses recorded in your account will be more than before, the same as the profit recorded. Along the line, you can decide to increase the fund dedicated to Copy Trading or reduce it as you deem fit.
Forex trading is one of the most intimidating endeavors, especially for a newbie. The many indicators, charts and the need to learn a lot about trading can make it even more intimidating. It tends to be intimidating and many traders are forced to give up after a series of failed attempts to make money online via Forex trading.
Copy Trading takes away all these worries since the entire trading activities are taken over by another person, a professional trader capable of reading the charts and indicators to produce trading signals. Copy Trading removes the fear of losing money in Forex trading and helps you to concentrate on other important areas of your life since someone else is trading on your behalf.
With Trading, you do not have to know anything about Forex trading since you will not be making the trading decisions by yourself. Copy Trading also gives you an opportunity to learn a thing or two about Forex trading since you can watch how the expert traders make decisions and why they make that particular trading decision.
You can even develop your own profitable trading strategy using the idea you got from the copy trader’s activities. Following the activities of the expert as they reflect on your account will also enable you to learn from their mistakes so that you will watch out for those mistakes when you build your own strategy out of what the master does. Consequently, you will be learning from the mistakes of others with minimal risk of your capital, which is a wise way to learn.
However, you must be adequately observant before you can learn to build a strategy using the master’s trading activities or plan. Conclusively, you can say that Copy Trading is a mutually beneficial kind of relationship between the “master” and the “slave”.