Venturing into the world of trading can be a complicated task for beginners. However, with the development of finance industry and web technology, even beginners can be accessible to mature investors’ trading movement thanks to copy trading.
What is copy trading
Copy trading is an investment strategy where traders copy the trades of experienced and successful traders. It provides a platform for beginners to learn, understand, and implement trading strategies used by seasoned traders. This method not only simplifies trading but also offers potential profits, even for those who have little to no knowledge about trading.
It’s different from mirror trading, a strategy that allows traders to select a trading strategy and automatically mirror the trades of an expert trader in their own trading account.The process is fully automated, which means that once a strategy is chosen, the trades are executed automatically without any need for the trader to intervene. This strategy was introduced in the early 2000s and is commonly employed by experienced traders and institutional investors.
In essence, the primary distinction between mirror trading and copy trading lies in the level of automation and the trader’s engagement. Mirror trading is highly automated and requires minimal involvement from the trader, while copy trading necessitates more active participation
Pros & Cons of Copy trading
Although copy trading is not a rocket science that are difficult to master, it still has something to be concerned of. For novice traders, here are the both sides of the coin:
Pros
- Learning opportunity: Copy trading allows new traders to observe and learn from experienced and successful traders. By replicating their trades, novice traders can gain insights into trading strategies, risk management, and market analysis.
- Efficiency: Copy trading makes it easy because you don’t have to do a lot of research or analysis. If you’re new to trading, you can just pick a trader who’s doing well and copy what they do. This means you don’t have to spend a lot of time learning about the markets.
- Diversification: Copy trading enables novice traders to diversify their investment portfolio by following multiple successful traders. This spreads the risk and reduces the impact of potential losses.
- Emotional control: Emotions can often cloud judgment and lead to poor trading decisions. Copy trading removes the emotional aspect from trading, as trades are executed automatically based on the actions of the chosen trader.
Cons
- Lack of control: Novice traders surrender control of their trading decisions to the trader they are copying. This means they are reliant on the performance and decisions of that trader, which may not always align with their own risk tolerance or investment goals.
- Limited learning: While copy trading provides an opportunity to learn from successful traders, it may hinder the development of personal trading skills and knowledge. Novice traders may become overly reliant on copying trades and miss out on the educational aspect of trading.
- Risk of following poor traders: Not all traders in copy trading platforms are successful or reliable. Novice traders need to carefully select the traders they follow to avoid copying poor trading strategies or falling victim to scams.
- Hidden fees: Some copy trading platforms may charge additional fees or commissions for using their services. Novice traders should be aware of these costs and factor them into their overall trading expenses.
Overall, copy trading can prove advantageous for novice traders due to its valuable learning prospects, time-saving capabilities, and remarkable diversification potential. Nevertheless, exercising caution, conducting extensive research, and comprehending the possible pitfalls is of utmost significance prior to embarking on this venture.
How to copy trade on mobile app
There are many platforms and online services to choose from. However, it never turns easy to pick one suitable for beginners. Now you can refer to following tips and learn how to start your copy trading journey on the go.
- Pick one broker
In order to protect your own wallet from scam, you should take these parameters into consideration: security and legality; reliability; usability. Most platforms will provide demo trading account, hence, you can test the platform by yourself.
If you are experienced and has some unique strategies, you can choose etoro, IG or forex.com. However, if you prefer to use mobile trading app and just step into the trading world, AAA Trading platform is one perfect choice for you.
- Open account
In this step, you just need a few minutes to fill in some basic information. The most necessary option is your phone number which is helpful to manage your account well.
- Target your investing market
In fact, you can try copy trading in all markets: forex, stocks, commodities, indices and cryptocurrency. The reason these markets are suited to copy trading is that they are complex and can be hard to predict. Copy trading allows less experienced traders to leverage the knowledge and experience of successful traders.
In AAA Trading app, once you open the app, the first page shows you a copy master area where you can choose from. Just click the drop-down bar: “Instrument”, then multiple markets are ready for you.
- Choose the experienced signal provider
In the copy master area, you can judge the traders ability and profit condition by detailed data. You can also click the person you are interested in and get a deeper research into the profile, which has the person’s trading history and latest transactions. After thorough investigation and cautious deliberation, you can click the “copy” button and set your lots to officially start your copy trading. Meanwhile, you can also run the whole process in the demo trading account.
Summary: Manage Risk
Copy trading serves as an invaluable instrument for novices seeking a gentle introduction to the realm of trading. Nevertheless, comprehending the potential risks and constraints remains an imperative undertaking. Novices should exercise caution in selecting providers to emulate, embrace portfolio diversification, and utilize copy trading as a stepping stone towards cultivating their unique trading strategies.
Manage Risk With AAA Trading
If you want to get higher returns by following orders, it is very important to keep the settings consistent with the traders, so you can refer to the trader’s setting suggestions. But make sure you know how much you want to risk.
Here are some tips on how you can keep your risk under control when copying trades:
Firstly, you can manually set lots according to your fund. AAA Trading offers a minimum trade size of 0.01 so you can explore more options.
More importantly, set a stop loss, the maximum loss you’ll tolerate. You can usually set a loss limit of 5%-10% of your total funds when you open a trade.
It is essential to remember that every investment strategy teems with inherent risks, and past triumphs offer no absolute assurance of future outcomes. Therefore, thorough research and consultation with financial advisors should always be considered.