Most Forex traders are terrible at managing risks. They overuse leverage, take large positions, and do not protect themselves. So, when the market moves against them, they burn. They lose. In no time, they wipe out their accounts and decide that Forex is not for them. So, they quit. This is a pattern that can be noticed with so many of them.
As a result, there is a huge need to help Forex traders make better decisions in their trading. No matter the particular currency pair being traded, they need to know when to enter positions, take their profits, and exit the market so that when the market goes against them, their loss can be capped. A tool that has proven most useful in this regard is Forex Trading Signals.
There are many ways by which this tool is being used among traders. But one of them that has been getting increasingly popular with them, is Copy Trading. So, what is Copy Trading?
Introducing Copy Trading
Many years back, the idea of online retail trading was unheard of. The situation only began to change with the advent of the internet. The same internet factor brought with it many other revolutionary trading possibilities, and copy trading was one of them. Copy trading started around 2005 as an offshoot of algorithmic trading, a system of trading that works solely on computer software.
Thus, it was operated as a system of automated trading whereby traders hosted and shared their trading strategies and records on specific platforms so that other traders could follow and also execute for their own gains. The idea has remained almost the same since then except that now, traders do not need to submit their strategies again. Rather, they just need to connect directly to those platforms which then make their trades more easily available to other traders.
The copied trades come with stop-loss and take-profit orders which are also executed directly in the copying trader’s account. Usually, the copied trader levels a flat fee or a subscription charge for his service. However, the copying trader can cancel this relationship anytime he stops finding it beneficial, without any negative aftermath.
Indeed, copy trading has increased in popularity. Even, many retail brokers have adopted it to help newbies especially get kick-started in trading by connecting them to the successful traders on their platforms. Copy trading is a subset of the larger social trading whereby, beyond trade recommendations, traders also seek to connect with and support other traders within the network.
How Copy Trading Works
Copy trading is an arrangement that exists between two market participants: the copied and the copying traders. A portion of the copying trader’s account is linked to the account of the trader to be copied so that any action being executed on the copied trader’s account is instantaneously replicated on the copying trader’s account.
In addition to its many benefits, copy trading has also led to the evolution of a trader-based investment portfolio style whereby traders’ funds are indirectly managed by their fellow traders, instead of traditional investment managers.
Effectiveness of Copy Trading
Numerous investigations have been made into the effectiveness of copy trading. Many questions have been raised too: is it effective? Is its adoption really worth it for the many Forex traders who use it? In fact, the desire to answer those questions has been taken beyond the Forex signal industry itself into the academic fold.
A 2012 study of traders on the eToro Social Investment Network by MIT discovered that those traders who were enrolled in the network’s “guided copying” arrangement fared almost 10% better than those who were just trading manually, without any guidance. Since, the same investigation team has been developing a system that could make copy trading more sustainable and more beneficial to its adopters.
Although used by different kinds of traders irrespective of their levels of experience, copy trading has been found to be especially useful for beginner traders. For this category of traders in particular, the Forex market can be most confusing. Little wonder that the highest rate of failure is also found among them. With copy trading, their chances of succeeding in the market can be tremendously enhanced. With it, their trading glory can be achieved even without them having to lift a thing.
Copy Trading has proven to be effective. The turn-around in the performances of so many erstwhile failing Forex traders after adopting it is a living testament to that. By giving you the chance to benefit from the accurate Forex Signals of an expert and successful trader, it enables you to considerably improve your trading performance.
1000pipBuilder is headed by a Forex analyst and trader who has tons of experience under his belt. Thus, the signal provider offers the best opportunity for you to benefit from the trades of an expert, and enhance your profitability in the process. You should sign up for their signals.