7mins read
Published on: Oct 24, 2024
#Trading 101
Recently, copy trading has become quite popular due to its ability to allow users to duplicate the trades of more experienced traders. However, is copy trading legit or profitable?
➔ Copy trading allows users to replicate the trades of other traders in real-time.
➔ While profitable, copy trading comes with risk, since it is simply an alternative to any trading approach.
➔ There are copy trading fraud schemes, so you must do your research in choosing a secure platform.
Copy trading is an attractive way for beginners to start their trading journey. It is already a popular approach that allows users to follow the trades of other experienced traders, or master traders. However, many wonder: Is copy trading a legitimate approach, and could it make money? Is copy trading safe or are there any risks?
This guide peels back the layers of copy trading, discussing how profitable copy trading is, whether or not it is safe and legal. It also presents some of the most secure and easy-to-use copy trading platforms to consider.
The name says it all: Copy trading allows investors to automatically copy the trades and replicate the strategies of more experienced traders in real time. It allows you to mimic the trades of other users in your own account.
Copy trading gives traders the opportunity to profit from the skills of those who have achieved positive results over a long period. This strategy is hands-off for users, as they will not have to monitor the markets themselves, allowing new traders to engage with the financial markets with little or no effort.
Copy trading platforms like BitDelta enable you to copy the trades of professional traders, who usually charge a fee or share a percentage of the profit. This approach is especially beneficial for traders who lack experience or time.
Copy trading was born in the early 2000s inspired by mirror trading and an offshoot of automated trading systems. Initially, as the trading experience was shifting online, institutional investors were the first to use it followed by retail traders.
Mirror trading was the initial concept, offering the ability to copy entire trading strategies. This evolved into copy trading, which initially worked with pre-set strategies but was quickly enhanced to allow users to follow individual traders directly. Users could also see the history of professional traders on these platforms to make an informed decision of whom to follow.
Over the years, the copy trading concept has slowly expanded to include traditional stocks, forex, cryptocurrencies, commodities, and indices. It is a popular feature of many trading platforms nowadays, allowing a wider range of traders to engage with the markets without having to be actively involved.
One of the most frequently asked—and legitimate—questions about copy trading is whether it is profitable. The answer to that depends in several factors.
The success of your copy trading depends largely on the performance of the trader you decide to follow. The returns can be good if you follow a trader with a history of making consistent profits. That being said, no trader makes all the right decisions all the time.
Like any trading approach, copy trading is profitable, if the right market conditions are there. When the markets are volatile, even the most experienced traders may experience losses. Conversely, trading in highly volatile markets can amount to big earnings, but the risk is higher.
It is important to choose a platform with transparent fee structures and no hidden costs. Most copy trading platforms charge a fee to use their service. The fees can be spreads, performance fees, or percentages of your profits. These costs can build up and impact your overall profitability over time.
BitDelta offers low fees and competitive spreads for trades, making it an ideal choice especially for new traders to get started.
Successful traders tend to diversify their portfolios across different assets to tackle risk. Diversifying risk across different markets and assets is a practical risk management approach to avoid the major negative impact of a single market.
Therefore, copy trading cannot be guaranteed to be profitable. To make the most out of it, we suggest you do your own research and diversify your portfolio to avoid over-reliance in a single market.
READ: The Complete Copy Trading Checklist for Beginners
Copy trading is legal in most parts of the world, but it is important to use a regulated broker. Platforms offering these services must meet requirements regarding transparency, protection of investors data, and security. A major benefit of using a regulated platform is that you’re protected against fraud, and your funds are safe.
Most countries have a native regulator. For example:
► The Australian Securities and Investments Commission (ASIC) is the financial markets regulator in Australia. It oversees the copy trading service offered by the country’s various financial platforms and helps to protect investors.
► ESMA (European Securities and Markets Authority) provides market policy oversight across Europe.
► The Commodity Futures Trading Commission (CFTC) and the National Futures Association (NFA) regulate copy trading in the US.
Copy trading is legitimate, but investors need to be aware of plenty of types of fraud in the space. Fraudulent platforms can take advantage of inexperienced traders, so it’s important to be able to recognise the warning signs. Here are a few tips that can help you to recognise fraudulent trading platforms.
Some platforms lack the necessary licenses. While they may provide some appealing returns, these platforms are not regulated, which makes them suspicious and risky. Before deciding to conduct trades on a platform, always make sure it is regulated by a reputable financial authority.
A few platforms tend to completely fake some of their traders’ performance history, misleading new potential users. Always research the trader you are following, considering their performance over a long period, and reading reviews and testimonials from other users.
Fraud copy trading platforms can also be run as Ponzi schemes, as the amount paid as a return to older investors is from new investors’ deposits, not from actual trading revenues. Avoid working on platforms that promise guaranteed profits or inflated, unusually positive profits—the chances it will happen are slim to none.
Some traders manipulate their trades, making it seem their trading is better than it really is. They may have strategies like leveraging high-risk trades with little money, which means they will inflate their success rate. Before following a master trader, always look at their risk levels and capital involved.
Top regulated copy trading platforms like BitDelta do not allow space for fraud. Such platforms transparently offer their traders' information and past performance to help you make an informed decision.
Copy Trading Securely: What are the Legitimate Copy Trading Platforms? There are a number of legitimate and regulated copy trading platforms. The most important criteria when picking a platform are its transparency, security, and meeting regulatory requirements. Below we have listed a few of the most trusted and legitimate copy trading platforms.
BitDelta is one of the fastest-growing copy trading platforms. With a massive focus on its users’ security, BitDelta is famous for its transparency regarding trader performance and regulatory compliance. It enables users to copy trades from across markets such as commodity, forex, cryptocurrency, equity, and exchange-traded funds (ETFs). Plus, it offers detailed, real-time data about the traders you follow, including their risk profile, past performance, and trading strategies.
eToro is one of the world’s most popular copy trading platforms, enabling users to copy trades from experienced traders across stocks, forex, or cryptocurrencies. eToro is regulated in several different jurisdictions, making it a safe bet for investors.
Zulutrade also enables users to follow top traders and replicate their strategies. It has been in operation for over a decade and offers a wide range of assets to trade.
Copy trading provides users with exposure to financial markets and the possibility of earning profits by following master traders.
That said, copy trading isn’t risk-free. Even experienced traders do not close successful trades all the time. Therefore, make sure to research the trader you are looking to follow, diversify your selection of master traders, and divide the amount of capital to place into play.
Plus, never invest money you can't afford to lose, and never believe a proposition that sounds too good to be true. By using regulated platforms and following experienced master traders, however, you can minimise the risk and potentially make a profit.
When security and transparency are your top concerns, at BitDelta, you are in good hands.
► Regulated: BitDelta is fully regulated and complies with country-specific financial regulations.
► Transparent: It offers detailed performance reports on its traders, allowing you to make informed decisions about which traders to follow.
► Secure: To protect your funds, BitDelta applies industry-leading third-generation security, including two-factor authentication and encryption.
► Offers Diverse Assets: You can trade across multiple asset classes, such as forex, stocks, commodities, cryptocurrencies, equities, and exchange-traded funds (ETFs).
Easy to use, with low fees and a solid reputation for reliability, BitDelta is an ideal platform for both newcomers and professional traders.
Yes, copy trading is legitimate and used by millions of investors worldwide. Reputable platforms like BitDelta offer transparency and security.
Yes, copy trading is legal in most countries, as long as your preferred platform is compliant with local regulations.
Copy trading is safe when performed on a regulated and transparent platform. However, like any form of trading, it carries inherent risks.
Copy trading can be profitable. However, like any other trading or investment, it is not guaranteed. It depends on the performance of the trader you follow, market conditions, and platform fees.
Some of the best platforms for copy trading include BitDelta, eToro, and Zulutrade.
Yes, it’s possible to lose money in copy trading, especially if the trader you follow makes poor decisions.
The main risks include market volatility, poor trader performance, and platform fees.
Look for traders with clear trading strategies, a long-term history of success, and a solid risk management approach.
Copy trading is more suited for beginners or passive investors, while traditional trading requires more time, effort, and expertise.
This varies by platform. Some platforms allow you to start with as little as $100, while others require higher minimum deposits.
Yes, most platforms allow you to copy multiple traders at once, which can help you diversify your risk.
Fees vary by platform but generally include performance fees, spreads, and commissions on your profits.
Yes, you can stop copying a trader and close your positions as you see fit.
This article is for informational purposes only and not intended as investment or financial advice. It contains opinions and speculations that are subject to change without notice.
The author and publisher disclaim any liability for decisions made based on the content of this article. Readers are advised to conduct their own research and consult a financial advisor before making investment decisions.
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