One form of portfolio management is copy trading. Through the trading, one can locate investors with similar track records that they desire to emulate. Investors are usually big names in the market with extensive portfolios and many followers. While undergoing copy trading, a trader will be in a position to study strategies embraced by other successful traders. As a result, they can devise their strategy and trade accordingly.
Copy trading is also known as following the trades of other traders. It is a way of learning from the mistakes or successes of other traders. One can learn from the mistakes or successes of other traders through copy trading. Most successful traders have a good track record that investors follow, allowing one to replica the trades of these fruitful dealers. The most important thing one should remember while copying advanced traders is that it requires discipline, patience, and commitment.
People with limited time to follow the market by themselves will find copy trading very vital. They can learn from other traders’ strategies and follow their favorite traders’ trades. Some of the things that one can do while trading is to use stop-loss orders, buy or sell stop-loss orders, and place limit orders. These are vital in copy trading as they will help a trader manage their portfolio. The crypto copy trading platform will come in handy for such individuals.
Short-term Trading
Copy-trading primarily focuses on short-term trading. The specific aspects of focus are swing trading and day trading. The strategies used in these two trading styles are very different from each other. The stop-loss orders used in swing trading differ from those of day trading as it is a more aggressive style of trading.
Day Trading
In day trading, stop-loss orders are placed to protect the trader’s portfolio. It is not recommended to place stop-loss orders on the long side of a trade. The step will cause you to be stopped and lose your entire profit. One can use one or two stops for your transactions, but having more than three stops for each is not recommended. The main reason is that if all of their stops are hit on one side, they will be stopped and lose all of their profit.
The main idea behind placing stops on a trade is to take a smaller loss than what might occur if one had placed no stops on the stock. If one puts their stop at an amount, they think they can handle losing, they will be able to protect their profits and avoid getting stopped out completely. The stops can also help them make better trades.
Swing Trading
In swing trading, stop-loss orders protect more money than what would be used in day trading. The main goal in swing trading is to make trades that are profitable from the start, and this means that you should place stops on your trades that will allow you to make a profit even after taking a loss. The stops should protect your earnings from the amount you think you can handle losing. Swing traders try to take advantage of short-term trends by placing their stops at an amount that allows them to make more profits than losses.
For a trader to place their stop-loss orders correctly, they need to understand how the markets work and the effect it has on their trades. There is no one way for everyone when it comes down to deciding where they will place their stop-loss orders, so each trader needs to find out what works best for them and then stick with it.
Techniques on Embracing Copy Trading
There are a variety of ways that one can embrace copy trading. A particular trader could decide to make a copy of all transactions made by other traders. Other traders could copy all the trades made on their accounts. The making of copies is called ‘full copy trading.’
A trader could also decide to copy other traders’ trades for a certain period. The trading based on a time frame is called ‘partial copy trading.’ Also, one can decide to make a partial copy of the trades made on their account while they wait for the market to develop in their favor.
The most common method of copying trade is ‘half-copy trading.’ Half-copy trading involves making a full copy of all the trades made by another trader and then half-copy trading them. The half-copy trader copies only half of the trades made by another trader and then stops their trading for an hour or two (depending upon the trend). They repeat the method several times until they have copied all or most of the trades made by another trader during that period before resuming their trade.
Once one has the crypto copy trading platform, one can deploy any of the techniques mentioned above. Every copy trading platform has a ‘live’ market and a ‘history’ market. The live market shows the prices of cryptocurrencies being traded at present, while the history market shows all the trades made on the platform during recent times. The trader can make their copy in either or both of these markets according to their choice.
Rules on Copy Trading
Copying trade is an easy way to earn money from day traders since it does not require knowledge or skills. However, specific rules need to be followed to avoid being caught by exchange authorities such as FEDs and SECs.
The following are the rules that need to be followed while trading binary options:
- One must not copy the trades made by another trader without obtaining prior permission from the trader.
- An individual must not use another trader’s account ID and password to access their account information.
- One must not use other methods to copy trades, such as using a utility program or a third-party broker. These methods are considered illegal and can lead to the termination of your trading privileges.
- It is also important to note for people not to engage in fraudulent practices when trading binary options and should never violate any securities or securities trading laws.
