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How Does Copy Trading Work in 2020
Trading on Forex seems to be something incredibly difficult. Do you know that you don't have to trade yourself to make money on the foreign exchange market? Copy trading has been operating in the market for a long time - automated duplicating of well-to-do traders' actions to your account. All you need to do is connect to the service, choose an account for following and count the earnings.
How does copy trading work?
Copy trading is a type of automated trading, in which transactions from one account are repeated to another. How does it happen? There are specific platforms for the following trades. You register in such a platform, pick a trader (Signal Provider)and subscribe to his trading signals. After that trader's positions are automatically reflected in your Forex account. If you are not satisfied with any of them, you can close it. Naturally, copying other people's signals is not free. A trader gets a certain percentage from the profit or any fixed amount per month. The platform, through which the copying goes, also has its interest, for example, the percentage of the subscription cost. Copy platforms, in turn, cooperate with brokers to draw Providers and Subscribers. The scheme of interaction looks like this: Signal Provider (trader)---> Platform for copy trading ---> Forex broker ----> Signals subscriber. A successful trader registers on the auto-trading platform and advertises his account with signals for the subscription. Thus, he becomes a Signal Provider. The Subscriber selects a Signal Provider at the service site for copy trading or the broker's site and subscribes to his signals. The Provider places an order on his Forex trading account, the transactions are transmitted via the platform to the Subscriber's trading account. Pay attention - you do not shift money to the account of the Signals Provider, as in the case of PAMM accounts. Trading is conducted with capital on your account. It will be better if the amount on your account is roughly corresponding to the balance of the Provider. For example, if a trader has $10,000 on his account and you have just $100, trading will be impossible for you. A trader can open a lot, which will be equivalent to your whole capital. On the other hand, some services scale the volume of trades depending on the balance ratio between Provider and Subscriber. Please check the terms of the service thoroughly to surmise the profit and loss ratio between Provider and you.
How to choose a reliable trader for copying signals?
Here Providers show the product manipulating ratings. The higher the rating, the more pricey it is a subscription to the signals. 1. the trading history should be long enough (at least 60 days), with a bunch of positions. 2. a large number of followers shows that a trader is popular. 3. consider a trader's approach, how many positions does he make per day? If he is a scalper, isn't his strategy too risky? 4. The maximum drawdown should not exceed 25-30%. 5. The average profit per month is 15-30%. Signal Providers are rated, and the higher he is, the more expensive the signals. New Providers often sell signals for free to gain ratings. If you don't have enough money for the signals of demanded Providers, take a risk and contact the new ones.
Pros and cons of copy trading
Pros Profit without knowledge - you profit from your trades regardless of your skill level. An expert will do everything for you. Trading Style - you pick the Signal Provider whose trading manner satisfies you. More free time - you no longer spend much time watching the market. MultiTrading -you choose as many Signal Providers as you want. This is how you diversify the risks. In other words, you will reduce potential failures and will not lose all at once. Losses on one signal will be compensated by profits on the other. The total profit may decrease, but risk control is worth it.
Cons High risks - Forex is ambiguous and volatile. Despite good indicators and profitable trades, a trader can make a mistake at some point and go down. Therefore, you should be aware of all the risks of copy trading. Professional depravity - when you follow other people's trades, you start losing your grip. You do not follow the market accurately, do not learn from mistakes, do not apply technical and fundamental analysis. The brain rests without new challenges, like flesh without training. 24/5 - The trading platform/terminal must be permanently enabled.
Is Copy Trading Legit?
At first glance, copy trading can seem too good to be true. It just seems to be easy to simply follow and copy the trades of the most highly ranked traders (signal) and rake in all of the profits. So, what's the catch, or is copy trading legit? First of all, we’ll go ahead and say there are always risks associated with trading, even the most qualified and successful traders encounter losses. With that said, it’s safe to say that copy trading is, in fact, a legit trading method that works and can be very profitable. However, it can also be disheartening as profits are not guaranteed and anything can happen in the financial markets. As for the question of whether or not copy trading is legit, it most certainly is. Copy trading is carried via an automated trading system. The automated system connects part of your portfolio with the portfolio of a trader you`ve chosen. Depending on the platform, you can set distinct parameters such as which assets and trade types to copy, how much money to allocate, and you can set your Stop Losses and Take Profits. The platform will then automatically copy the trades of your chosen trader and take your set parameters into account as well.
How do I copy a Forex trade?
Here is how to get started: Sign Up to PaxForex – Open an Account Here. Verify Your Account – there is a verification process new accounts need to go through. Find traders to follow. Allocate Funds – once you've found someone who you like, just send a request to the support team. Then choose how much you want to allocate to that trader. Once copied your account will now automatically copy all the actions made by that trader. You can see all your investments in the Trade tab on MetaTrader4.
Setting the Forex Copy Trades
So, we found out that hundreds of thousands of traders operate on particular platforms, each of them has a particular working strategy, which makes a definite percentage of profitability each month. The server hardware manages all incoming positions to open and close orders, and copies them to other market participants who have agreed to replicate the positions of prosperous traders. The copying of transactions can be configured in the following modes:
If there is a desire to trade autonomously, but there is uncertainty in yourself and your strength, you can simply analyze incoming signals and match them with your points of entry into the market before you choose to open your positions.
Semi-automatic mode of copying trades. This mode allows monitoring all signals on market entry and selecting which trading strategy to copy on your account. This type allows an investor to open trade according to the received signal, and if the situation is negative for the investor, he can close the order without waiting for the Signal Provider`s decision to close the trade himself.
Copying Forex positions in a fully automated way. It is necessary to decide whether this or that type of trading tactic is suitable for you (for example, to choose a trading type through the filter: conservative, medium, aggressive). The choice will depend on what kind of profit the investor expects and what risks he is ready to take. Once the settings are complete, all signals from the selected Provider will be received by the trading terminal.
Copying a trader can be both profitable and educational. However, it can also be detrimental to your development as a trader, if you let it. It can also harm your bank account if you`re not careful. Never rely too much on someone. Always remember the risks and that no matter how good a trader is, he's bound to make a mistake. You need to notice when things are going down and act accordingly.