#Trading 101
Copy trading is a feature or approach that allows traders to automatically copy other traders’ moves. It has become a favourite among new and busy traders, enabling them to do more with less effort and time.
➔ Copy trading allows a trader to engage with markets by automatically copying other traders.
➔ The profitability rate depends mainly on the master trader you follow and market movements.
Over the past few years, copy trading has gained popularity among traders worldwide. Early copy traders demonstrated success with little effort, drawing a new era of trading.
Copy trading is a feature or approach that requires minimal time and effort. It enables traders to copy other traders’ moves, making it ideal for those lacking expertise or time. This blog discusses what copy trading is, how it works, and how to execute it as part of your trading journey on BitDelta.
Copy trading is a feature or approach that enables following and automatically replicating the trades of other traders. Copy trading allows you to follow the most profitable traders on a copy trading platform and automatically replicate their traders.
Copy trading is a feature that can be implemented across diverse asset segments, such as stocks, commodities, forex, cryptocurrencies, or indices. You can simply follow the master trader–based on your strategy or risk management preferences–and monitor your portfolio occasionally as you automatically follow other traders’ trades.
You can also wait for the copied trader to close their position, which automatically closes yours, or you can close it manually.
Image: Copy Trading, by IG
If you are a risk-averse and conservative trader, you should follow a trader with a similar approach. If you prefer high risk/high reward, you should follow a trader who does not mind getting into risky situations.
There are two ways in which copy trading works:
In automatic copy trading, the trades of the trader you are following are automatically executed for your account. For example, if the copied trader opens a new position for XAU/USD in their account, the same position will automatically open in your account.
In semi-automatic copy trading, you can either proceed with the exact trade executed by the copied trader or reject the suggestion. Similarly, you can choose to close the position whenever the copied trader closes, or you can close it manually.
Copy trading and social trading are two different trading approaches. Social trading involves traders connecting on social media and sharing tips, tricks, and strategies for successful trading. While social trading requires more attention, copy trading is relatively passive.
The main benefits of copy trading include the following:
If you are short on time, skills, or experience in trading, automated copy trading is perfect for your investment journey.
Copy trading lets you learn from top traders by analysing their strategies, portfolios, and trade timings, allowing you to slowly develop your own trading strategies.
Copy trading allows you to diversify your portfolio by copying different traders who specialise across diverse asset classes.
READ: Importance of Risk Management in Trading
Copy trading carries risks inherent to trading, including price volatility, illiquidity, and tax rate hikes.
Plus, your performance in the market is directly linked to the master traders you follow, making you entirely dependent on their performance. Since no trader can be successful every time, you must constantly monitor the traders you follow and reevaluate their results.
If you are a new trader who wants to begin engaging with the market but lacks any prior experience or time to research the markets, copy trading can be of huge help to you.
Many traders trust copy trading as they believe they follow experienced traders. Inexperienced traders use copy trading to leverage the trading experience of experienced traders and trade with minimum risks, while experienced traders who are short on time use it to trade with minimum effort and involvement.
Copy trading existed before social media, where traders followed newsletters or newspaper columns. With the rise of the internet, it evolved into a popular online feature integrated into trading platforms.
Here are a few things to keep in mind when using copy trading:
Go for a reliable copy trading platform that allows copy trading and hosts successful traders you can copy.
Go through the list of the most successful traders listed on the exchange and choose those to follow whose goals align with yours. Look at their past performance to make an informed decision.
Decide on your investment amount and deposit it into your account.
Your performance is directly linked to that of the traders you copy. Therefore, whether you are making gains or losses, assess the performance of these traders regularly.
Adjust the capital among the traders accordingly and assign higher percentages to the successful ones.
Stay updated on finance and business news to be aware of any upcoming moves that may impact the markets.
Yes, BitDelta supports copy trading. Below are the steps you can follow to get started.
1. Log in to BitDelta and go to 'Copy Trading' in the navigation bar.
2. At the Copy Trading page, you will find two main buttons:
• Go to My Copier Dashboard: Access your personalised dashboard.
• Apply to be a Master Trader: Apply to be a master trader on BitDelta within a few clicks.
3. Scroll down, and you will get a general view of three key elements:
• Most Copied Master Traders
• Most Profitable Master Traders
• Recently Joined Master Traders
4. Verify your KYC.
5. Deposit funds to your Spot Wallet.
6. Pass the Derivatives Quiz to validate your knowledge and explore the Copy Trading portal.
7. Select your preferred portfolio and click the “Copy” button.
8. Complete the Copy Trading quiz to ensure you understand how it works.
Copy trading is a trading feature or approach that allows traders to automatically mimic other traders with their accounts.
Copy trading involves following another trader by automatically executing their trades into your account.
Copy trading and social trading are two different concepts. Copy trading is passive and automatically follows another trader, while social trading is more interactive and focuses on knowledge sharing through social media or networking channels.
You should consider several factors before choosing a trader to follow. These factors include:
• Past performance
• Investment portfolio
• Trading strategy
• Risk management tactics
• Risk to reward ratio
• Number of followers
There are two types of copy trading:
• Automatic Copy Trading
• Semi-automatic Copy Trading
Below are the pros and cons of copy trading.
Pros:
• Automated trading
• Learning experience
• Portfolio diversification
Cons:
• Market risk
• Execution risk
• Dependence on successful traders
Sure, you can develop a copy trading strategy. Here are a few things to keep in mind:
• Choose the appropriate copy trading platform that hosts a diversity of successful traders.
• Choose the best traders to follow whose trading performance aligns with your aspirations.
• Distribute your funds among successful traders in a diversified manner.
• Conduct a performance assessment and adjust capital distribution regularly.
Follow the steps below to start:
• Log in to your BitDelta account and select “Copy Trading” from the navigation bar.
• You will be directed to the Copy Trading page, where you will find two main buttons: Go to My Copier Dashboard and Apply to be a Master Trader
• Scroll down, and you will get a general view of 3 key elements:
1. Most Copied Master Traders
2. Most Profitable Master Traders
3. Recently Joined Master Traders
• Verify your KYC.
• Deposit funds to your Spot Wallet.
• Pass the Derivatives Quiz to validate your knowledge and explore the Copy Trading portal.
• Select your preferred portfolio and click the “Copy” button.
• Complete the Copy Trading quiz to ensure you understand how it works.
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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