What is copy trading?
Copy Trading is pretty much what it says on the tin. You effectively copy another person’s trades. This enables new and experienced traders to take part in the financial markets by having their trades executed by seasoned traders with proven track records. This offers a unique solution for people who are interested in investing money in the forex market with the aim of profiting. A new trader who is still learning can start earning from others, and experienced traders can increase their investment on top of their own trades, especially since they cannot possibly trade 24 hours a day.
Benefits of copy trading over managed accounts
The main thing is security. If you haven’t already read the avoid forex scams page, you should go do that now. One of the biggest issues we see is people giving money directly to traders, and very few are actually regulated or know what they are doing. With a Copy Trading account, your funds stay in your own account giving you complete control over who you copy, how much you invest, and you can stop and withdraw at any time with no penalties.
How to start copy trading
Different brokers will have different types of Copy Trading accounts. For this example we will use CM Trading, as a fully regulated broker with one of the best copy trading platforms, you will have a lot of options with your trading.
The Sirix Webtrader platform offered by CM Trading has a built-in social trading option. This allows you to place your own trades through the web trader, or setup copy trading. You can even set your system to notify you when someone trades instead of automatically trading, giving you more control.
On the right-hand side you will see the social section. In this example, I selected the trader called Mooney007 and clicked on him.
This brings up his profile, the first page gives a basic breakdown. I can see that he is high risk but also high profit. So I wouldn’t want to put all my funds in to follow him, but I’m willing to risk $100 because it stands a very good chance of paying itself off quickly.
So by allocating $100 equity it reduces my overall risk. By doing this, it also allows me to allocate funds to multiple traders to split my risk. Good copy trading systems allow you to do this. The advantage being that if one trader has a poor performing month then hopefully the others do well.
So I assign the $100 equity and then click 'Copy'.
