Today, many social trading platforms for Forex and stock trading offer the option of copy trading. As the name implies, copy trading involves copying the positions taken by other traders and connecting a portion of your portfolio to theirs. When you link your profile with another trader, you copy all of their current positions on the market, as well as any subsequent actions they take. A new trade is opened when they do, a trade is closed when they do; a trade is closed when they win, and trade is closed when they lose. There is no guarantee that you will not be able to influence the outcome. Once you have established a connection, most platforms allow you to close trades, open new ones, and otherwise moderate the overall outcome. Yet, by copying another trader, you can easily earn money based on their expertise.
What are the reasons for the popularity of copy trading?
This type of trading has become increasingly popular due to the fact that it allows new traders to earn an income on the market. There are many traders who construct so-called “people-based” portfolios. As a result, instead of investing in stocks or forex, they invest in other investors and do not participate in trading.
A copy trading strategy consists of several elements, which is, in turn, a subset of the concept of social trading. Copy-trading involves using an online trading platform such as MetaTrader 4 to copy the trades of a successful trader.
In order for copy trading to take place, it is necessary to have several parties present, as well as an advanced online trading platform and technological systems which make the trading possible. Below, we discuss all aspects:
Exchange systems have existed for thousands of years, however, the role and presence of online forex brokers have dramatically changed over the last few decades. Thanks to the advent of technology and globalization, the rate of currency exchange online has increased significantly. Forex brokers have evolved into a variety of financial instruments like share, commodities, and indices trading and online forex brokers such as FP Markets play an important role in financial markets due to the fact that they simplify the investment process.
An advanced online trading platform is one of the key features of a good forex broker. Technology-based platforms such as MetaTrader 4 and MetaTrader 5 offer a high level of functionality and are simple to use. Specifically designed to accommodate the needs of forex and CFD traders, these platforms contain a range of features. The growing popularity of copy trading is one of them. This platform allows you to not only copy trades automatically but also to employ trading strategies, such as risk management through portfolio diversification and the use of stop-loss techniques.
Is the end-user involved in the copy trader process? It is made up of less experienced investors who wish to invest in financial markets, including the forex market and global stock markets. A copier does not conduct extensive market research. Instead, they choose the traders that they wish to follow and the trading platform automatically replicates the trades that are executed by the provider.
It is time to examine how copying traders work for those who are interested in doing so.