What is Copy Trading and Where to Start?

Copy trading lets investors automatically replicate the trades of experienced and successful traders and offers easy access to the world of trading with reduced effort and expertise. 

What is Copy Trading?

If you want to develop the perfect golf swing you could do a lot worse than investing your time in copying the movements of the all-time great golfers like Tiger Woods, Ernie Els, Rory McIlroy, Annika Sorenstam, or Scottie Scheffler.

OK, you might never get to wear the coveted Green Jacket of a Masters winner, but by following their techniques and using their knowledge, you have a much better chance of success. 

Just like copy trading.

Copy trading is an investment strategy, provided by apps and online platforms, where individuals copy the actions of proven successful traders. 

The concept is simple: when a professional trader executes a trade, the same trade is automatically replicated in the follower’s account (your account). 

This process lets novice traders benefit from the expertise of more experienced traders without having to perform complex market analyses themselves.

In this guide to copy trading, you’ll learn everything you need to know, from how copy trading works to copy trading in forex and copy trading in crypto. We’ll show you how it works, who it benefits, and all the pros and cons. 

We’ll even give you the low-down on Traders Connect, one of the best copy trading platforms on the market.

So, without further ado, let’s get trading.

How Does Copy Trading Work?

Copy trading is an investment strategy that relies on social networks and social trading systems to copy and replicate the trades of experienced traders. 

When a primary trader (the experienced trader) opens a position, this information is broadcast to other traders on the network. These traders can then choose to manually copy the position or let their automated trading systems replicate the trade without further input.

Typically, the primary trader has significant experience in the market, whereas the copy trader might lack this expertise or be entirely new to financial markets.

One highly popular application of copy trading is in the forex market, where price movements are small but frequent, requiring constant monitoring. 

Forex copy trading allows traders to mirror the trades of experienced forex traders, avoiding the need to track the fast-moving market themselves. 

This strategy is particularly beneficial for those who prefer a hands-off approach while still participating in potentially profitable trades.

To start your copy trading adventure, you’ll need to do the following:

1. Choose a Platform: Sign up on a copy trading platform like Traders Connect – there are hundreds to choose from. We recommend Traders Connect.

1. Select a Trader/s: Use the platform’s filtering tools to find a profitable trader whose style and risk tolerance match yours.
2. Allocate Funds: Decide how much capital you want to allocate to copy the trader or traders.
3. Automatic Replication: When the selected trader makes a trade, it is automatically executed in your account proportionally.

For example, if a trader opens a buy position on gold using 5% of their account, the same trade will appear in your account, proportional* to your allocated capital. 

*(For example; if the trader buys gold using $5,000 of their $100,000 account, your proportional trade would be $5 from your $100 account).

Who Uses Copy Trading and Why?

Copy trading is popular among a diverse range of investors, each one with their own unique motivations.

Let’s take a look at who these investors might be.

Beginner Traders

Copy trading provides an easy entry point into the trading world. 

Novice traders can leverage the expertise of seasoned professionals without needing in-depth knowledge of market analysis or trading strategies. 

This lets them learn by observing successful traders’ actions and helps them to gradually build an understanding of the markets.

Busy Individuals

For those with limited time to dedicate to trading, copy trading offers a practical solution. The automated nature of copy trading means that once a trader is selected to follow, the system handles the replication of trades without requiring continuous monitoring. 

This hands-off approach enables busy individuals to stay involved in the financial markets without the need to constantly manage their trades one by one.

Risk-Averse Investors

Copy trading allows for diversification by enabling investors to follow multiple traders with varying strategies. This diversification can help spread risk across different markets and trading styles, potentially reducing the impact of any single trader’s poor performance.

Additionally, copy trading platforms often offer tools to set risk parameters, such as maximum loss limits and capital allocation per trader, providing further control over risk exposure.

Aspiring Traders

Individuals who want to become proficient traders can use copy trading as an educational tool. 

Just by following and analyzing the movements of successful traders, they can gain insights into market dynamics, risk management, and strategy implementation. 

This practical learning experience can be invaluable in developing their trading skills and strategies (just like improving your golf swing by learning from the greats).

Investors Seeking Consistency

Some investors are attracted to copy trading for its potential to provide steady returns.

By following traders with proven track records of success, they can aim for steady performance over time. This approach can be especially appealing in volatile markets where individual trading decisions might lead to unpredictable outcomes.

Investors with Specific Market Interests

Copy trading is helpful for people interested in specific markets but who lack the expertise that goes with it.

For example, traders who want to get involved in forex or cryptocurrencies can follow proven experts in these areas. This way, they can participate in markets they are curious about without needing to become specialists.

Copy Trading for Everyone

In a nutshell, copy trading is great for all kinds of people – from beginners and busy folk to cautious investors and those interested in specific markets. 

Its ease of use and automatic features make it a popular choice for anyone who wants to get involved in trading with the help of the top industry investment experts.

Social Trading vs. Copy Trading

Social trading and copy trading are both popular strategies for using the expertise of other traders, but come with distinct differences.

Copy Trading

Copy trading is a type of social trading where your account automatically copies the trades of a chosen trader. 

If they profit, you profit; if they lose, you lose. 

This approach is mostly passive, with automation handling the bulk of the work. However, it’s worth noting that some platforms let you pick which trades to copy. 

This is great for new traders as it allows trading beyond their experience level, however, it can also limit personal learning and carries the risk of losses if the chosen trader performs poorly.

Social Trading

Social trading is a broader strategy that combines social media with investing. It focuses on community interaction, allowing traders to share insights, strategies, and updates. 

Platforms involved in social trading typically feature message boards, chatrooms, and customizable news feeds to keep investors informed about their favorite traders. Many of these apps offer detailed trader statistics, including portfolio details, risk scores, and success ratios. 

Social trading is a private environment where traders can learn from and engage with a community and offers a whole range of resources to enhance their trading knowledge.

Choosing the Right Strategy

Social trading and copy trading both have their own advantages. The best choice for you depends on your needs and preferences.

• Copy Trading: Ideal for beginners or those who prefer a hands-off approach, as it automatically copies the trades of experienced traders.
• Social Trading: Perfect for those who enjoy interacting with a community and learning about trading strategies.

Many copy trading platforms provide solutions for both. That’s why choosing the platform that best matches your trading style and goals is vitally important.

Copy Trading vs. Mirror Trading

Copy trading and mirror trading are two strategies that let you follow experienced traders, but they work in different ways.

Copy Trading

Copy trading is when you directly replicate the trades of selected traders. When these traders buy or sell, the same trades are made in your account automatically. 

This method is simple and great for beginners who want to benefit from the expertise of seasoned traders without doing their own market analysis.

• Personal Connection: You follow and copy specific traders.
• Flexibility: You can choose which traders to follow and switch if needed.
• Learning Opportunity: You can learn by watching the trades of experienced traders.

Mirror Trading

Mirror trading is a bit different. Instead of copying individual trades, you follow a trading strategy that’s often run by automated algorithms. 

These strategies are usually created by groups of professional traders.

• Algorithm-Based: You follow a strategy designed by multiple traders, not just one.
• Automation: Mirror trading is fully automated and runs on algorithms.
• Diversification: These strategies can trade in multiple markets at once, offering more diversification.

Choosing the Right Strategy

When deciding between copy trading and mirror trading, think about your preferences and trading goals. Here are the main differences:

• Copy Trading:
  • Personal Approach: Follow specific traders and learn from their trades.
  • Flexibility: Easily switch between traders.
  • Involvement: Great for beginners who want to see what experienced traders are doing.
• Mirror Trading:
  • Automated Strategies: Follow algorithmic strategies created by professional traders.
  • Diversification: Trade across multiple markets at once.
  • Hands-Off: Fully automated, making it ideal for those who prefer less involvement.

Choose copy trading if you want a more personal and educational experience. Go for mirror trading if you prefer automation and diversification. Both offer great benefits, so pick the one that suits you best.

Copy Trading in Forex and Crypto

Copy trading can be used in many financial markets, including forex and cryptocurrencies. Here’s how it works in each:

Forex Copy Trading:

• Highly Liquid Markets: Forex markets are very active and operate 24/5, which makes them perfect for copy trading.
• Expert Guidance: By copying professional forex traders, you can benefit from their deep understanding of currency pairs and market movements.

Crypto Copy Trading:

• Volatile and Complex: Cryptocurrencies are known for their big price swings and technical challenges.
• Learn from Experts: Copying experienced crypto traders is especially helpful if you’re new to the crypto market, as they can navigate the complexities for you.

In both forex and crypto markets, copy trading lets you leverage the skills of seasoned traders to improve your trading outcomes.

Why Traders Connect is a Great Choice for Copy Traders

Traders Connect stands out as a top recommendation for copy traders due to its advanced features and reliable performance. 

As a leading trade copier running in the cloud, Traders Connect offers lightning-fast execution and an easy setup, ensuring that your trades are synced seamlessly and efficiently.

One of the key benefits of using Traders Connect is its comprehensive account analytics. These tools help you monitor and understand your account’s performance, making sure you are on the right track with your trading goals. 

Additionally, the platform includes an economic news calendar, allowing you to stay informed about important news events and protect your capital during major announcements, which is especially useful for prop firm traders.

Traders Connect also excels in integrations, providing instant notifications to your Slack group, Discord server, emails, and more. This ensures you are always up-to-date with your trading activities. 

Built entirely in-house, the platform does not rely on any third-party connections, making it the most reliable option on the market. 

Traders Connect, like many other trading websites that employ crypto payment gateways to better the experience, also accept cryptocurrencies in their services through CoinGate.

Getting Started with Copy Trading on Traders Connect:

1. Open an Account – Register on the Traders Connect platform.
2. Choose a Trader – Use the platform’s filters to select a trader that fits your investment goals.
3. Allocate Funds – Decide how much capital to allocate to the trader.
4. Monitor and Adjust – Regularly review the trader’s performance and make adjustments as necessary.

Traders Connect Pricing Models

Traders Connect offers a straightforward and flexible pricing plan to accommodate different needs. 

For individual members who want to connect a single trading account, the cost is $15 per month or $160 per year. If you need to connect more than one account, the pricing is $10 per account per month, or $100 per year.

For example, connecting two accounts would cost $20 per month or $200 per year. This scalable pricing structure allows you to connect exactly the number of accounts you require, whether it’s 1, 5, or even 5,000, providing flexibility for traders with ambitions of different sizes.

Pros and Cons of Copy Trading

Pros:

• Automated Trading – Your trades are handled automatically, so you don’t need to watch the markets all the time.
• Easy to Find Profitable Traders – Platforms provide tools to help you find successful traders based on their performance and risk levels.
• Emotion-Free Trading – By removing emotions from your decisions, copy trading can lead to more consistent results.

Cons:

• Dependency on Traders – Your success depends on the traders you follow. If they make poor choices, your account can suffer.
• Limited Control – While you can set some risk limits, you have less control over each individual trade.
• Market Risks – Even with copy trading, your trades are still exposed to market ups and downs and unexpected risks.

The Copy Trading Takeaway

Copy trading is a great way for investors of all levels to join the financial markets by following experienced traders. It’s easy to understand, works automatically, and can help you reach your investment goals. 

Whether you’re new to trading or just want a hands-off approach, copy trading offers a simple and flexible way of entering the trading marketplace.

Plus, if you’re ready to start, Traders Connect is a top choice to start your trading adventures. With fast trade execution, detailed account analytics, and a reliable platform, Traders Connect makes copy trading easy and effective. 

FAQs

How is my copy trading income shared with the lead trader? 

Between 8% and 13% of the profits you earn from copy trading are shared with the lead trader, depending on their profit-sharing rate. For instance, if you earn 100 USDT in profit from copying a lead trader’s trades, and their rate is 10%, you would pay them 10 USDT.

What are the risks of copy trading? 

The main risks of copy trading include dependency on the chosen trader’s decisions, limited control over individual trades, and exposure to market volatility. 

Even experienced traders can make poor decisions, and unforeseen market events can impact trade outcomes.

Is copy trading legal?

Yes, copy trading is legal in many countries, but regulations vary by region. To ensure your investment is protected and adheres to industry standards, use platforms that are regulated by reputable financial authorities.