Why Copy Trading is the Most Profitable Option for Novice Traders?

Author: Jhorton Jennifer

Copy trading- If you are a regular crypto trader, you’ve probably heard of it. But if you are new to crypto trading, you might be wondering what all this fuss is about. Crypto copy trading is a winning strategy that will help you effortlessly and quickly start trading like an experienced crypto trader.

Let’s understand this heck:

Copy trading

Everyone wants to be a profitable crypto trader, but the actual difficulty of getting through the learning curve of the technical analysis and time required to make a winning strategy means that there are a few traders that actually manage to make a living through crypto trading.

So, what do you do when you don’t have much time to stare at charts, but still want to improve your skills? The answer is copy trading!

This is a portfolio management strategy where a novice trader copies the exact trades of the successful traders. Getting started in copy trading is much easier and the first thing you need to choose is the right crypto trading platform. So, crypto copy trading actually helps reduce the learning curve in the market.

For beginners, this kind of trading lowers the probability of overleveraging their accounts by achieving the most successful and profitable results without having to do complex market research. Apart from this, the traders can select multiple traders with different trading strategies to copy. The next step to decide on copy trading is to decide how much to invest in this kind of trading.

And, if you have opted for multiple traders, then you can split your investment accordingly. Further, the traders can either opt for automatic or manual copy trading. For fully automated copy trading, making use of specialized crypto trading bots is the best option. Regardless of the degree of automation, the traders can easily monitor all the open positions. And, if you are a pro or expert trader, you can even offer your services via social trading platforms and earn profits whenever any trader copies your trade to make a profit.

How to choose the best copy trader to copy from?

Finding the right copy trader is a cumbersome task. Here are some criteria to narrow down your selection to find the best trader:

  • Experience- All copy trading platforms have a comprehensive profile for each trader along with their detailed profit and loss records, risk levels, long-term returns, etc. Based on these factors, one may rank the traders and identify the best one.
  • Investment strategy- We all know, there are thousands of cryptocurrencies to choose from, and so as their portfolio and investment strategies. Analyze their portfolio diversification will reduce the risk of losses.
  • Communication – Another key criterion to choose the best copy trader is to check to see how frequently they interact with their followers.

Make sure to read the reviews of the followers about the trader and checking to see how many followers they have are the best option to see how profitable they are.

Benefits and risks of copy trading

Before analyzing whether copy trading is worthwhile for you, make sure to analyze the benefits and risks associated with this.

Benefits

  1. It’s the most convenient option for beginners as they can earn while learning the new strategies. And, if you are a beginner, copy trading allows you to learn how the market works.
  2. Copy trading offers the best way to earn passive income. By making use of copy trading bots or full automation, it frees up the traders’ focus on other activities. Those who don’t have time to analyze the market trends can copy the trades of others in order to earn profits.
  3. Copy trading allows you to earn benefit from the technical expertise of the expert traders with advanced risk management strategies.
  4. It allows you to control your losses as if the results don’t meet your expectations, simply stop copying the trades.

Risks

  • Even expert traders lose sometimes and there is no 100% profitability record in trading. This means that you will lose money at some point. If you copy trades from multiple traders your chances of losing may increase.
  • Copy trading is not free and most successful traders charge a fee for them.

How copy trading works?

In this kind of trading, the trader links a portion of their portfolio to the portfolio of the pro trader, and all of their open trades can be copied exactly in the same way. Additionally, all the actions taken in the future will also be copied from one account to another. The copy trader can decide how much they want to invest in the trades of the pro trader they are copying.

With copy trading, you are getting a mirror copy from the copy traders’ real account. Basically, there is a master account (pro account whose trades you are copying) and the follower account, i.e. copier. Whenever the master opens, closes, or exits any kind of trade, all the activities performed will be replicated to the copier account automatically.

That means if he opens any position with 20% of his balance, you will also use 20% of your invested amount on the same trade. Online crypto trading terminal like TrailingCrypto, eToro, etc. that are using copy trading features often vary a lot in their terms of use and conditions.

This is why it’s always important to select the right copy trading platform while considering all the pros and cons. Always make sure to choose a copy trading platform which is integrated with trusted platforms like Binance, KuCoin, etc.