Wondering what copy trading is? Read about it somewhere but failed to get to grips with the notion? Want to know the pros and cons of copy trading? Today’s your lucky day. In this article, we will cover the topic of copy trading, the meaning behind the term, as well as the benefits and drawbacks of this form of trading. Ready to learn the fundamentals of copy trading? Keep reading.
Copy Trading: The Basics
What is copy trading? The name says it all. It’s a form of trading that suggests monitoring and emulating the patterns of successful investors. In other words, you just repeat a ‘successful story’ of an experienced trader without having to study stock market dynamics or trends on a daily basis.
Below, we’ve rounded up the main parameters according to which copy traders choose their more successful ‘colleagues’ to imitate:
- the magnitude of experience;
- trading history data (that usually implies regular high returns in their portfolio);
- the number of open positions;
- most preferred investment types.
Benefits and Drawbacks of Copy Trading
As for the pros and cons of this form of trading, there’s something to dwell upon here, too. The main benefit of copying skilled investors for newbies is the possibility to discover the financial market in a soft and easy way. That is to say, when you copy trade, you learn from the best, following their well-trodden-yet-triumphant path, and potentially achieve a high revenue without having to ditch your other income sources.
In a nutshell, here are some vital perks of copy trading:
- chances are you’ll boost your earnings once you get the gist of certain patterns;
- it’s a great way to start your online trading business;
- learning from the best investors is a win-win approach;
- it helps you understand and establish connections with the best experts in the field;
- with a long-term perspective in mind, copy trading brings some truly excellent passive income goodies to the table.
Now that we’ve outlined the pros of copy trading, we’re sure you’re eagerly awaiting to learn more about the cons. Well, here they are:
- finding a pro to copy trade is not so easy;
- laying your hands on the best copy trading software is not a piece of cake, either;
- online trading is not like Math, it’s more like Art: therefore, copying something that’s elusive and changeable does not guarantee success in your unique case.
Is Copy Trading Safe?
The answer to this question depends on how ready you are to invest your time and effort in your online trading endeavors. Yes, you will understand the market a lot better if you copy other traders. Yes, word has it that copy traders tend to succeed faster compared to the folks who just trade manually. But will all that contribute to your trading safety? Only if you are knowledgeable and experienced enough in the field to guarantee your own safety as a trader. Long story short, take one step at a time and always keep that 10,000-hour rule in mind if you want to earn some serious money trading.
Bottom Line: So, Is Copy Trading Good for Me?
Copy trading gives you an outstanding start as a trader by taking the guesswork out of choosing the most suitable investment strategies for you. When emulating some of the best traders’ experience, you learn to avoid the same mistakes they had made. Naturally, copy trading is risky. But what isn’t risky these days?
Cutting to the chase, deciding whether to give copy trading a try or not is entirely up to you. Always remember that being professional in any field means learning non-stop. So, stay hungry, stay foolish, know the risks, and practice courage. Fortune favors the brave, they say.
