Copy trading
With copy trading, traders can elect to follow other traders and have their actions copied automatically. Instead of opening positions manually, you give the software permission to open and close positions based on the actions of the trader – or traders – that you have elected to copy.
Copy trading is popular among novice traders who prefer to follow an experienced trader with a proven track record rather than do their own trading.
Among more experienced traders, copy trading has become a much-hailed tool for risk diversification. By copying someone else – a trader that is different from you – you can risk diversify in new ways instead of getting stuck in a rut.
Do I have to invest exactly the same amounts as the trader I am copying?
This depends on the broker, platform and copy service you chose. Some are very rigid, while others give you more flexibility. There are for instance solutions where you can copy proportionally, allowing you to do smaller or larger trades than the master you are following.
We advise novice copy traders to refrain from using leverage. Leverage is very tempting for copy traders, since it can allow you to open the same big positions as the master your are following even though your bankroll is much smaller. When you use leverage, you borrow money from your broker to carry out trades. You are risking borrowed money, and that is of course always a high-risk thing to do. You can end up losing more money that what you have in your copy trading account.
Is copy trading available for cryptocurrency trading?
Yes, but the number of available brokers and platforms is smaller.
Examples of cryptocurrencies that are available for copy trading are Bitcoin, Litecoin and Ether. Copy trading is available for both crypto-crypto currency pairs and currency pairs where one currency is crypto and the other one is a traditional currency.
To do cryptocurrency copy trading, you can for instance sign up with eToro, 3Commas or Coinmatics.
Important: You will find a larger selection of brokers, platforms and cryptocurrencies if you only want to gain exposure to cryptocurrencies instead of actually buying and selling cryptocurrencies. To gain exposure, you can for instance use Contracts for Differences (CFDs) wher the underlying is cryptocurrency.
Can I do copy trading on my mobile phone?
Yes, mobile apps that support copy trading are available for both iOS and Android mobile devices.
You can for instance use the MT4 app, the MT5 app or the eToro app.
The eToro app requires an account with eToro, while the MT4 and MT5 apps are available in combination with a wide range of different brokers.
What´s Metatrader?
There are many trading platforms to chose among online if you are interested in doing copy trading. Two of the most well-known platforms that support copy trading are MetaTrader 4 (MT4) and MetaTrader 5 (MT5). MT5 was intended to replace MT4, but many traders really wanted to keep using MT4 so now both MT4 and MT5 are available simultaneously.
One of the reasons why MetaTrader 4 & 5 are so famous is that they aren´t tied to any specific broker. A wide range of brokers give their clients access to MT4 & MT5, so these platforms have become very widely known among traders online.
Both MT4 and MT5 are large and comprehensive trading platforms that will give you access to a lot of assets and products, as well as tools and services – including copy trading.
Is leveraged copy trading possible?
Yes, as mentioned above, some brokers offer leveraged copy trading.
When you are using leverage, you are borrowing money from the broker to carry out trades. You are risking borrowed money. Using leverage adds a new element of risk to the situation, since it is possible to end up losing more money than you have. You can end up in debt to the broker.
Because of this, some jurisdictions and license providers have imposed limits on leveraged trading for consumer traders.
What are trading signals?
Trading signals is an alternative to copy trading for traders who wish to be more in control of their trading and have the opportunity to tweak the parametres before any action is taken.
You recieve a signal from a signal provider, but the trade does not take place automatically. You will have time to edit your settings and trading parameters. Of course, this also means a delay, which can be harmful – especially in day trading situations where every second counts.
The renowned MT4 and MT5 are both famous for offering a huge selection of signals from thousands of traders, but they are by no means the only options available. As always a good idea to compare what several providers have to offer before you make any decision. Also remember: some signals are free, while others require a paid subscription.
