What is Forex Copytrading?

Nowadays, Forex trading has become accessible to even those who are naive. People from all over the world are trying various formats of trading. Automation trading is one such example. In this type of trading, traders leverage technology to place trades and reap benefits. Copy Trading is the most famous type of trading within the same segment. Since the name itself represents the overall function of how this process executes.

Social trading often takes advantage of features that make it easier for platform users to interact with one another, such as the ability to remark, “like,” and share links. In addition, users can uncover possible forex copytrading chances through the analysis of the success records of other site investors through social trading.

In contrast to systems dedicated only to copy trading, several companies specialising in financial trading offer copy trading capabilities as an integral element of more comprehensive social trading platforms.

Copy trading is a popular trading strategy where any novice trader or investor directly copies the exact positions or portfolios of another experienced traders. It is a suitable approach for traders new to the stock market and need more expertise, time, and commitment to analyse the market. This practice can be implemented manually or automatically, and it has become a popular branch of social trading.

If you are new to copy trading, this guide will grant everything you need to know. We will explore the history, the process of copy trading, the strategies involved, examples, pros and cons, and the difference between copy trading and social trading.

[ Suggested read: Forex Copy Trading Tips ]

How Does Copy Trading Work?

Copy trading is the process by which a trader replicates the trade positions of an experienced trader in their portfolio. The merchant can choose the amount of capital to invest, and transactions occur in real time. To begin replica trading, selecting a preferred trader and synchronising your portfolio with theirs is sufficient. This procedure is possible on capital markets such as the crypto and stock markets and even occurs in Forex imitation trading.

Copy trading began in 2005 when automated trading algorithms started to be copied. When there was no need to monitor trade positions continuously, it was revised, and its potential was explored. Since no longer requiring specific trading strategies to be submitted, platforms like Etoro and Zulutrade were the first to allow users to link their accounts to their platforms.

Today, there are numerous copy-trading brokers on the market. According to a survey, one in three traders considers traditional trading difficult and may move to copy trading.

[ Suggested read: pros and cons of copy trading ]

Copy Trading Strategies

There are three main copy trading strategies that traders use:

1. Manual Copy Trading

Manual copy trading is similar to standard trading, in which a trader determines whether or not to follow another trader who has a reputation for generating high returns, or simply because he or she enjoys the investing style of the second trader, and then copies their trade manual initiating every position. Also known as social trading.

2. Semi-Automated Copy Trading

Traders can examine the positions held by their chosen traders thanks to the semi-automated trading approach. They can choose which positions to trade from that location, and those positions will be opened immediately. It is only partially automated because the trader must perform some of the jobs; however, the remaining portion is handled automatically.

3. Automated Copy Trading

When a system is fully automated, the traders can select their preferred customers and the most effective trading tactics. Therefore, their portfolio instantly reflects their current absolute position and any deals that may come after it. Since each website offers its users a unique set of options, this tactic can only be utilised to sell complete packages.

Examples of Copy Trading

To better understand copy trading, let’s take a look at some examples:

Example #1

Jason recently started a new job and is earning a decent income. He’s always been interested in investing in the stock market but lacks the expertise and time to monitor and analyse the market. After researching, he comes across William, a well-established and successful investor whose investing style he admires.

Jason manually imitates William’s trades and portfolio positions and keeps track of any new investing moves William makes. He continues to copy William’s trades and portfolio positions to achieve similar returns without the need for extensive knowledge or analysis. Over nine months, Jason earns an 11% return by following William’s investing footsteps.

This example illustrates how a novice investor can follow a successful investor to earn good returns without having extensive knowledge or expertise.

Example #2

Continuing with the original illustration, Jason’s sister Emily was impressed by this idea but was more curious about cryptocurrency. As a result, she decided to perform more study, during which she learned that Steve, an additional Bitcoin investor, had a proven track record of significant gains. As a direct result, Emily decides to invest, much like her sister.

How to start Copy Trading

At CapitalXtend, You can copy the movements of experienced traders and reap the same results. To start copy trading, you need to follow these simple steps:

1. Create a live account
2. Log in to the Trader’s Room and navigate the Copy Trading section.
3. Choose a trader you want to copy from the list of experienced traders.
4. Allocate the amount of funds you want to copy trades with.
5. Start copy trading with just one click.

Conclusion

It is not difficult to comprehend why retail traders and investors select the trading strategy of copy trading as one of their available options. Copy trading is a viable method for diversifying your assets and learning from more experienced traders, despite its associated dangers. It is effective and allows you to benefit from the expertise and experience of other traders.

Using the copy trading option provided by CapitalXtend, you can trade various financial instruments, including CFDs, currency pairs, and cryptocurrencies, amongst others. Leverage most of the opportunities afforded by copy trading and trade like the pros with only the press of a button.

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