Copy trading is in practice by those traders who do not have enough knowledge, skill, and time but want to trade. It is a branch of social trading. A trader here copies the other trader’s position. It can be done both ways automatically or manually. Before investing, you must analyze the market position. Even if you are copying an experienced trader, the possibility of having a loss is there.
How Is Copy Trading Carried Out?
Here, the trader depends on the social trading system and social networks. They broadcast the information when a trader opens a position. Now it’s upon the other trader to decide. He can also open the same position or it can be carried out through an automated trading system without waiting for any additional info. The trader who announces his position is the primary trader and the other one who copies him is the copy trader. The copy trader takes benefits from the experience of the primary trader.
What is copy trading? If you want to understand it thoroughly, go through the pros and cons first. Nothing can be understood clearly unless you know the possible advantages and the risks involved in it. Even if you are copying someone, try to get the basic information. You cannot invest blindly. Even a trader with a strong portfolio may face loss.
Pros of Copy Trading:
- The Best Plan for Beginners:
It is for those who do not have anyone to guide them through all stages, they do not have enough knowledge but they still want to start. Lack of time can be a reason too. Despite all hinders, you can start with the help of copy trading.
- Reach Out To The Expertise:
You get the chance to access someone who is going well in the market. You can take advantage of his expertise.
- Demo Account:
A demo account is also there for those who want to experiment before actually starting the trading. Through Demo accounts, you can take benefit from useful research tools. These accounts are free of cost.
Cons of Copy Trading:
- The Risk Factor:
Copy trading does not ensure that you are risk-free. Even if you are copying an experienced trader, the chances of loss are there. If one goes through a financial loss, the other one will also face it.
- Lack of Control:
Once you are into copy trading, you experience a lack of control. You get little chances to research and learn about the market on your own.
- An option For Those Who Want to Put Little Effort:
Those who do not want to put their effort into their work make ways through this option. They don’t have to study or research the market and can easily follow a successful trader.
- Not Available In The Entire US:
It is in practice in many parts of the world but not available to people of the USA due to the Dodd-Frank Act.