Copy trading: tap into the knowledge of top-performing traders and earn money

To be a successful Forex trader, you need to have extensive experience and knowledge of financial markets. But what if you are a novice trader who is just getting started? In this case, copying trades can be a great way to make money in Forex.

What’s in there for signal providers?

For professional traders who share their trading strategies and provide signals, it’s a great opportunity to generate passive income. If a trader’s strategy is successful, they earn a so-called performance fee – a percentage of profit investors make from copying the trader’s transactions.

How does a broker benefit from copy trading?

Brokers earn commissions from every transaction. So they are interested in attracting both signal providers and those who are willing to copy their trades. In other words, it’s a win-win for everyone. By offering a copy trading service, brokers attract active traders and investors, which allows them to expand their client base.

How to choose the best trader to copy

• Research the market. Check all available options for signal traders and evaluate their reputation, experience and results.
• Assess the strategy. It should match your goals and risk profile.
• Look at the account age. It should be six months or older.
• Check the strategy’s return (ROI) and the account’s maximum drawdown. The yield chart should be smooth, without sharp peaks and dips, and the maximum drawdown should not exceed 30%.
• Diversify. Do not invest all your money in one trader. Choose at least three.

Risk management in copy trading

Any transaction, be it independent trading, investing or copy trading carries a degree of risk. Therefore, healthy risk management is necessary. One should comply with safety rules to reduce potential losses in the event of an unfavorable trading outcome.

Be aware of your risk

Copying trades is not a guarantee of profit. It all depends on what trades the trader opens and whose trades investors copy. When copying trades, you do not control the trading process. You cannot influence the opening or closing of positions. The trader can make a wrong trading decision resulting in a losing position, causing losses for you as well. Therefore, before you start copying someone else’s trades, assess the risks.

Keep track of your account

When copying trades of another trader, you must monitor your account and periodically check the results. If you notice that the trader starts to open unprofitable positions, it’s better to stop copying their strategy.

You also need to monitor your balance and set limits on the level of risk. That will help you avoid significant losses and save your capital.

Give yourself time to learn

If you’re just starting to copy other traders, do it carefully. Don’t invest “in everything” at once. Allocate a small amount of money, test the selected copy trading service, copy several traders and compare the results. Don’t rush.

Never invest money that you can’t afford to lose

That’s probably the most important rule both traders and investors must follow. Trading carries risk. It is not worth risking the money if the losses on your investment can seriously affect your well-being.

Generally, copy trading is a great way to earn in Forex for beginners and experienced traders. The most important thing is to choose a reliable copy trading service, select one or more suitable traders, to never underestimate the risks or invest every last penny of your savings.

Is it worth using copy trading services?

Like any tool in the Forex market, copy trading services have their pros and cons and you must decide for yourself which ones outweigh the other:

Pros

• Convenience and ease of use for novice traders;
• Ability to choose traders with different trading styles and profitability levels;
• No need to waste time trading on your own;
• Ability to limit risks by setting limits on the size of copied trades.

Cons

• The risk of losing money in case of unsuccessful transactions made by a trader;
• You need to pay the trader the fees. As a rule, from 20 to 50% of your profit;
• Possibility of delay in copying transactions, which may affect the results of trading;
• It is necessary to monitor the performance of the selected trader.

Summary

In general, using copy trading services can benefit beginners, but you need to be aware of the risks and costs in the form of a commission to the trader.

For more experienced investors, it may be more efficient to trade independently.

Which service to choose

When choosing, it is best to be guided by personal experience. Try several services and choose the most convenient one.

Earn the same percentage of profit as a professional trader without expert knowledge and trading skills with AMarkets.

Are you interested in more great tips for novice traders?

• Scalping
• Using different indicators and analysis in the MT4 mobile app
• Rules Followed by Professional Traders