Copy trading is when one trader’s strategy is copied and executed by another trader directly into his/her account. The persons who provide the strategies we called them the “signal provider” and they are usually an expert in trading.
In copy trading, every time the expert close a trade, you close, when they profit, you profit and if they lose, you will too. These include any stop loss or take profit order as well. Once copy trade has been made, you will still be able to manage them yourself and disconnect or stop copying the expert whenever you wish.
A traditional investment portfolio focuses on live prices and market movement.
Copy-trading, it’s a people-based portfolio where you are looking at other trader’s portfolios, what’s their strategy and how successful they are. We call this smarter investment because they don’t just allow you to trade better but is also a powerful learning tool.
If it intrigues you, try out our Free Juno Auto Trader demo account and experience it yourself!
3 Types of Copy-Trading:
Decide on the strategy you wish to follow based on your needs and ability, and the strategy will be automatically replicate into your trading account. No human interaction required for this. To fully automate your trade, you need to have full confidence in the signal provider you’re following.
Able to pick and choose the position you want to replicate from the selected signal provider into your account. Not everyone is comfortable having no control of their own trades, this allowed you to track and close the trade whenever they wish. It will also automatically close when the signal providers close their trades.
This version allows you to be fully in control of your trade at all time, you execute your own trades but with the extensive knowledge and strategy of an expert trader. You will learn what indicates the expert to enter or exit a trade and follow their strategy.
In these modern days, social media has changed how we communicate, how we manage our social lives, and even how we present ourselves. Social media doesn’t just reshape us personally but also the economy as well as politics.
Copy-trading derives from social trading. Social trading is like social media for the financial industry. It allows traders to exchange and share trading strategies with one another and expert traders to gain followers and ranks.
Social trading first started in the early 2000s and gained popularity around 2008/2009. This is because of the advancement of technology and the internet, it’s easier than ever for individuals to get online and start trading.
Not everyone has the patient to spend hours analyzing market trends, testing out strategies, and monitoring their account continually for signals. Hence there is a rise in demand for social trading.
There are 2 Types of Social Trading.
Traders replicate one single trade precisely as the signal provider. This is the popular version.
Traders replicate every single trade position and activities made by the signal provider. This trade is initially only available for corporate clients but since then has opened up to retails traders.
Copy-trading for New Traders
This is an excellent tool for anyone new to trading. You can gain trading experience and learn from the expert. Watch how the professional decide when to enter the market, place a stop-loss order, and exit the market.
There is no better way to learn than diving straight in the market with guidance. Though for anyone new to trading, we highly recommend starting with Juno Auto Trader demo account first to get the feel of the market before going to live account. Applying copy trading is more efficient, timesaving, and you’ll get a quicker result.
As a new trader, you tend to be overly cautious in order not to make mistakes making the whole learning process longer and slow progression. Copy trading is like having a teacher that guides you through every trade and gives you direction on what moves to take. It takes the pressure of your own decision making and sees the profits much quicker.
Copy-trading for Professional Traders
For the experienced trader, use this tool to improve on your own trading. Double-checking or comparing strategies with the other signal provider, detecting market trends, and stay up to date with it. By becoming a signal provider, this tool allows you to earn some additional income. Getting a percentage of copy assets from the traders copying your strategy, or you’ll receive a payment from the broker for bringing more customers to their platform. Teach and share your knowledge of trading as well as learning from other experts out there.
Copy-Trading MetaTrader 4
Since more than 95% of forex brokers offer MetaTrader 4 on their website, Juno Markets is one of them, is worth knowing a little about copy trading in MT4. It has more than 3200 signal providers on the platform, and they are sorted by their trading result with the successful trader on the top. This makes it a lot easier for new traders to pick their signal providers. There might be a small fee to gain access to copy trading in MT4. Still, you’ll be able to replicate the chosen strategies on both live and demo account without needing to leave the platform.
For professional traders who wish to become a signal provider, contribute and share your strategies with others is very easy to do so in MT4. MT4 has the highest user in a trading platform, this makes them the best platform to be a signal provider and on top of that MT4 allows you to earn a fee from your followers.
What to Consider When Choosing a Copy Trading Platform
Regulation is there to protect your funds from the inherently risky nature of trading. Make sure you check a broker regulatory status before making a deposit.
This is the cost of trading. Make sure you check and understand all the fees to use a broker. Example of fees is withdrawal charges and other hidden fees such as an overnight fee.
The minimum and maximum deposit
4. Instruments offered
Different brokers offer different trading instruments. Make sure you choose the platform that has a vast selection of choice and has your preferred trading strategies in place.
5. Customer support
Choosing a platform that has excellent customer support is always comforting, especially when you are involving data exchange and money. It needs to be reliable, easy to reach, and competent.
In the fast-moving market, a slight delay or mistake can affect the trade. You need a broker that has a very stable platform allowing their traders to trade with minimal negative slippage. The platform needs to be able to integrate order execution in a large number (between the signal provider and the follower).
3 Recommended Copy Trading Platform
- Has a very active community users
- Provide both demo and live account
- Average starting deposit of $200 and good bonuses
- An excellent supportive community and resourceful site
- Great place to learn to trade
- Unlimited demo account
- Compatible mobile apps (iOS & Android)
- Automated copy trading available
- Availability to download historical data
- Traders are paid for winning trades
- Excellent customer support- able to contact the representative via instant messaging.
- Low starting deposit of $100
- Compatible mobile apps (ios & Android)
- Vast selection of signal providers
- Portfolio customization
10 Tips for Choosing the Right Signal Provider
To minimize your risk, follow a signal provider who is consistent with their trade. Several successful, profitable months with minimum losses mean they are steady and reliable. Don’t get blinded with their sudden one or two big wins, because that means they are taking a high risk, which might lose big as well. Look at the signal provider history graph, a gradual increasing graph means they are a consistent trader and those with irregular spikes are less consistent.
Obviously, you want to follow someone with experience, the longer you trade, the better you will be. Go for a signal provider that has been trading for more than 12 months, that will be enough to assess their trading strategies during the different market conditions.
Another useful indicator to see if the signal provider is an experienced trader, look at the number of trades, including their closed trades, anything over 100 is good. This proves that he or she is safe to follow, and their success is not just luck.
3. Number of followers
Usually, the higher the number of followers the signal provider has, proves that people trust their strategies. Make sure those followers are live account user and not demo user, just to see how much they have invested with the signal provider. From there u can judge if the signal provider is trustworthy. If you would like to dig deeper, look into the profit each follower gets from following the expert.
4. Trading strategy
Does the trader have a clear strategy? Are they trading manual or automated trade? It is essential to understand the strategy used by the signal provider. Don’t forget to compare the expert strategies with their history trade to make sure the strategy works!
The more different strategy you copy, the more diverse your portfolio will be.
5. Trading behavior
Pick an active signal provider, someone that continuously communicates with the follower. An expert that continually updates the follower on strategies and views, you’ll be sure they will be following the market carefully. You can count on them to react and adjust their strategy when new market conditions occur.
Monitor their behavior after or during a bad run, this is a great test to see if they trust their own strategy. An expert will stick with their tried and tested strategy and principles. While others might panic and start changing their strategy. If the pro you are following starts changing their trading behavior, you need to drop them.
6. How often do you want to trade?
If you are planning to trade every day, you need to follow someone who trades at least once in 24 hours. If not, you can follow any signal provider as long as they have at least traded actively in the past five weeks.
Drawdown simply means how much their account has been in negative before they started turning profits again. Again, if you wish to trade every day, look at the expert daily drawdown, the same goes for if you want to trade weekly, look at their weekly drawdown.
Try to avoid traders with high drawdown as they are very risky. Try to aim for traders with 20% or less maximum drawdown.
8. Winning percentage
Keep in mind if a signal provider has more than 85% winning percentage. It means they will have a high drawdown risk, or it could mean they leave their trade open for an extended period until it turns around.
9. Minimize risk
Pick a low-risk trader by looking at their average trade size. If the average trade size is lower than 10% means their overall performance is not dependent on a single trade, they have a diversified portfolio. Don’t follow someone who puts the majority of their trades in one instrument, all their eggs in one basket means they are playing a high-risk game. Aim for pro.
Is also worth considering copying traders from a different broker. As different broker has various features and often attracts different types of traders.
10. Don’t fall in love.
When you “fall in love” or build a good relationship with the signal provider, it will give way to flawed decision-making. When the expert is underperforming or changes, their trading strategy that might not suit you, you might feel reluctant to leave them.
Know when to cut your losses.
Think of it this way. Getting rid of underperforming traders will free up your capital to invest in potentially a better successful trader.
Benefits of Copy-Trading
Thanks to copy-trading, now everyone can trade in ease, no more pressure of making your own decision. It’s also a great risk management tool, it doesn’t just apply to forex trading, there are tons of instruments to choose from. It makes it easier for traders to enter multiple markets and diversify their portfolios. Understanding market analysis, technical analysis, and devising a trading strategy can be very time-consuming. With copy trading, all the hard work is done. Copy trading has definitely made trading simpler, and most platforms offer them for free with a minimum deposit.
Disadvantages of Copy-Trading
Traders tend to have the wrong idea that copy trading will reduce your risk entirely. All trading involves risk, even the expert might make a mistake, or the market might turn on them. Expert past performance is no implication of future success.
Remember copy trading means you are using another individual’s trading plan, which focuses on their own goals and motivation. You are relying on it to trade for you and taking full liability if anything goes wrong.
Another disadvantage is picking the wrong signal provider, you might have chosen a less successful trader who wanted to broadcast their trades just to gain some followers. You need to be able to identify that not all signal provider with a high number of follower is right. There is also a risk where an expert might stop trading halfway or change their strategies, this could be a risky trades.
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