If they take the time to learn the ropes and treat their copy trading account like they would any other self-directed trading account, copy trading can be a good option for novice traders. If you’re just getting started in trading, it’s wise to practice with a modest amount first before risking more money, and it’s wise to practice on a demo account before trading for real.
However, copy trading is not a suitable alternative, regardless of your level of trading expertise. Instead, it would help if you viewed copy trading as an additional instrument in conjunction with your current trading strategy and portfolio. Which Forex Software is suitable for Copy Trading? Trader’s Union has created a list of Forex software.
What is Copy Trading?
Copy trading is not a substitute for managing your account, and you must take full responsibility for making decisions that affect your trading outcomes. This is especially true for new traders.
When picking which trader to emulate, a prudent newbie will look at all available performance metrics. One of the essential metrics to consider when evaluating a signal provider is their willingness to take on risk. Consider a signal provider’s trading volume and frequency as you weigh whether or not their approach to the market aligns with your capital, desired rate of return, and level of risk.
Copy trading can be helpful for new traders, but only if they are willing to shoulder all the responsibility for their decisions. Copy trading is not a replacement for self-directed trading and should not be regarded as a passive investment or managed account. However, beginners who choose copy trading can adopt excellent habits, such as maintaining track of their account performance to make necessary changes.
How do you copy a trade?
When using a copy trading platform, you can choose which traders you want to copy by allocating a specific dollar amount to each trader (or signal provider).
How effective is copy trading in practice?
Copy trading is practical; you can see for yourself by looking at the records of the top traders. Likewise, some traders do lose money when copy trading. The key to success is making the right choices about strategies and when to employ them, allocating sufficient resources to each system, and establishing appropriate risk/reward boundaries.
Although there is no guarantee of success, the odds of making money by copying a trader with a good track record or history of returns are higher than if you copy a trader with a negative track record or history of returns.
When it comes to assessing traders and controlling risk, the resources available on copy trading platforms might differ significantly. Database biases also play a role (for example, recency bias, which can lead to simply following the trader currently performing best, which is not always the best choice).
Considerations on Copy Trading Further to the Above
To be a successful copy trader, you must have a firm grasp of how social copy trading networks rate traders based on their trading performance. Trade spies are also affected by how profit and loss are recorded and reported.
The quick backfill bias is only one of the problems that could arise if social trading platform developers allowed traders to upload their entire trading history with a single click instantly.
These problems have been recognized for quite some time; however, with the help of broker policies, government oversight, and cutting-edge technology, they are largely irrelevant, especially for the best forex brokers. Still, if you’re not sure, it’s best to double-check and get clarification.
Is FXTM legit or a scam?
FXTM is not a scam; instead, it is a legitimate, highly regulated broker. More than 10,000 customers in over 135 countries benefit from the trading services offered by FXTM companies ForexTime Ltd, ForexTime UK Ltd, and Exinity Limited. In addition, we give FXTM a high trust rating because the company follows all applicable regional regulations. FXTM has created a complete FXTM review.
What’s the deal with FXTM?
FXTM is a legitimate broker because it is licensed and regulated by authorities worldwide. CySEC in Cyprus, the Financial Sector Conduct Authority (FSCA) in South Africa, and the Financial Services Commission (FSC) in Mauritius all oversee the principal entity ForexTime Ltd.
The Financial Conduct Authority is a well-respected, keen regulator. Its licensing of the FXTM UK brand reflects that it complies with the European MiFID and ICF frameworks, which facilitate cross-broker activity.