What is Copy Trading?
Copy trading is a way to automate your trading by copying the trades of other professional traders. It is often used by newbies that might not yet know how to trade, with the added benefit of helping to teach them on the way. For more experienced traders, it can enable them to step away from their screens if they need to, as all trades are automated.
They don’t need to know how to analyse the markets or how to interpret forex signals or indicators. Novices are using other investors’ abilities and thus, increasing their own success rates. Also, copy trading can be used by experienced traders too, as a way of learning new trading strategies from others, and by that, increasing their success in the online trading market.
If you would like to start investing in the stock market but do not have a lot of experience, or you are a seasoned pro who would like to gain insight into the analysis of others, using copy investing / trading could be an excellent place for you to begin.
Goal Of Copy Trading
The goal of copy trading, like regular trading, is to open positions on various financial markets including FX, CFDs on Stocks, Commodities, Indices and Cryptocurrencies, and then to close the position, hopefully once the value of the asset has moved higher. Although, much like trading for yourself, here you can also incur losses too.
This could be a good option for those who lack the time or experience to invest by themselves. For this reason many brokers offer the facility of copy trading. There are a variety of platforms offering copy trading services, and while some are manual, others are fully automated. This enables you to sit back and watch the action.
How Copy Trading Works
On the copy trade menu you will see a list of professional and signal providers along with their stats. This usually includes P&L, and risk profile. Select the person/people that best suit your objectives and goals to follow, by using the tools provided by the platform Prodigy, Invest to filter the available traders. You can select more than two persons.
What is important to you? Perhaps it’s their number of followers, or profitability, risk level, the total amount of funds they manage or their return on investment. You might choose a combination of these – it’s completely up to you based on whatever you think is important.
Decide your investment amount, and how you will share it among different managers. Be balanced and don’t put all your eggs in one basket, so choose how much to allocate to each chosen trader if you have selected more than one person to copy. For further
The copy trading platform will then automatically replicate all the selected trader’s positions in your trading account.
Add more funds if you like how the trader is performing. Or, reduce your exposure to one trader and keep your portfolio diversified by not investing too much in a single trader. You can replace your existing ones at any time, just keep in mind that you’ll need a separate Invest account for each trader you decide to follow.
There are no special fees to use the copy trading function, apart from the ones you pay the Strategy Manager whenever they make a profit. Any brokerage fees that would apply to a normal trade will be applied to copy trades.
Benefits And Risks Of Copy Trading
The advantages of copy trading are the reason it has become so popular.
What is the goal?
To find traders that have a strong track record and trading style that you want to emulate. Or you can spread your risk across your portfolio which will enable you to ride the ups and downs in markets so that you can trade over the long-term.
copy trading offers an interesting and reachable route into trading. Huge advances in social trading and the multiple social trading networks means this is now freely available.
Upskilling your own trading knowledge
copy trading allows you to follow the trading activity of experienced traders, some of whom have years of expertise and know-how. You can learn from watching by replicating their success and developing your own trading.
with the huge variety of trade strategies on offer, you can now allocate your portfolio to numerous providers across different assets. By spreading the risks associated with individual decisions, you can offset losses if one trader performs poorly. You could also potentially make money in several types of market environments.
You can continue to trade in the markets throughout the day as someone you have chosen is monitoring them and trading. This means you can spend time on your other hobbies!
Risks Of Copy Trade
The main risk with copy trading is an obvious one – you are taking part in some risk with financial implications. Trading by its nature is a high risk, high reward endeavour.
copy trading, like with any trading in financial markets, involves putting some of your capital at risk. Inevitably, the market risk associated with this means you can lose that capital as the assets your chosen trader has bought and sold may prove unsuccessful.
choosing a long-term reliable trader to copy can be difficult. It is up to you to do your own homework to make sure you understand your chosen traders. Sometimes, results can be too good to be true, or a trader is going through a hot streak which means a drawdown is close by.
as with any financial trading, there is risk involved if the assets being traded are illiquid i.e. how easy is it to exit the positions held. You also need to be aware of other areas like what costs are included in the copy trader’s returns and is the bid/offer spread already included in published returns.
Copy Trading Essential Tips
Copy trading ties up your account with another trader in that their positions are automatically replicated in your account. If they turn profits, you win; and if they lose, you lose. Copy trading is more passive because the trader does all the work you are copying, and in most cases, the process is entirely automated. Copy trading is generally ideal for beginner traders as it allows them to trade way beyond their level of experience or expertise.
It is, however, essential to select a strategy that suits your trading needs and preferences at any given time. It is vital to select the most comfortable one that meets your trading needs and preferences.
What Are Trading Signals?
With trading signals, you receive notifications which are like suggestions of what to trade, when to enter or exit the trade and what stop loss or take profit orders to implement. You may receive them by SMS, email or through a dashboard. Of course, it’s important to use a signal service that gets more successful than unsuccessful trades. Usually Signals are generated on the basis of a variety of technical indicators, especially the strong signals. You can of course create your own signals, by using technical analysis and implementing studies and indicators on to your trading charts.
Copy Trading Platform
Most software will have the option of three types of copy trading functionality – automated, semi-automated and manual. Prodigy market offers the industry's leading FX trading platforms MT4 & MT5 directly on your PC, MAC, mobile or tablet so that you can trade at your convenience whenever and wherever you like. The advanced technology of MetaTrader combined with Prodigy’s unparalleled trading services, offers a high quality experience for the user.
* Manual is most similar to ‘normal’ trading where you decide who to follow and which trades to copy. Many people refer to this as social trading too.
* Semi-Automated trading lets you view all the positions of your chosen trader. You can then choose which to copy and trade yourself or which to automatically follow which means your chosen trader takes the lead.
* Automated is the full package and the one that Prodigy Invest offers – you choose your traders and the strategies which best suit your risk profile. All positions and subsequent trading are replicated automatically.
Copy Trading Terms
Let’s remind ourselves about the FX market, which is by some distance the biggest traded global market:
allows you to hedge trading risks by incorporating different trading strategies and assets in a variety of market conditions. This is a key benefit of copy trading.
is the person who follows other traders to utilise their information or directly copy trades from them.
the pip difference between the order price and the execution price of a trade execution. Due to market volatility or slow internet connection, the order price could change before it reaches the broker for transaction.
often means charts which a trader uses to interpret historic price action and behaviour for future direction.
is the fall in equity in a trader’s account, normally from a relative peak to a relative trough. It can be expressed in absolute terms or in terms of percentage.
allows you to copy a trader’s actual strategies.
allows you to copy transactions made by one or more investors inside a trading network.
is the graphical representation of the signal provider’s account balance.
is the way to control risk and the most important factor is determining success or failure. How much should we assign to each provider and each strategy?
the price the trader chooses to close out a live trade in order to limit your losses if the market moves against you. Stop loss levels depend on the trading strategy.
is the understanding of all news including economic and political to forecast future price movement.
is the trader who identifies the signals to be followed by the investor or follower/copier.
currency ticker symbols are used in the forex market to represent the pair that is being traded. A currency, such as the dollar, is never bought or sold in absolute terms, but always in relation to another.
Copy Trading main FAQs
Who Are Trading Signals Providers?
They can be identified by either humans or by algorithms, which are like pieces of code programmed to identify signals, when ample market conditions are reached. Here at Prodigy, we use tried and tested resources and services for our signals and copy trading products. However, once again remember that all trading comes with the risk of loss and you should only trade with what you can afford to lose. Our signal creators include hedge funds, expert brokers, and money managers. This means that if you use copy or mirror trading with Prodigy Market, you are essentially gaining valuable access to the minds of seasoned traders. This allows you to copy their trades and hopefully benefit from their experience. The combination of Prodigy market global reputation, coupled with some experienced signal providers, gives you the security in knowing that you can trade or automate your trades with a reliable broker.
Do I need prior trading experience to engage in copy trading?
If your plan is only to follow and copy other traders there is no experience required, although it can be helpful in analysing and selecting a good trader to copy. In reality it is often the traders with no experience who like to use copy trading. It can be a good way to begin growing an account, and if you take the time to analyse the trades being made by those you follow it can also be a very good way to learn about trading too. If you’re a new trader and are worried about losing money with copy trading you could always try it with a demo account first before funding your account
Is copy trading too risky?
If you take the time to identify good traders to copy you aren’t taking any more risk than when trading your own account. That is to say trading is inherently risky, and there is always the possibility that you will lose money. Also note that the past performance of a trader is no guarantee of their future performance, so even if they’ve been profitable for three years running, they could have their first losing week right after you decide to follow them. As always, never invest more than you can afford to lose
How can I find good traders to copy?
While it might seem tempting to copy the trader with a 300% annual return, in general these traders are taking on far too much risk and eventually will blow up. Instead look for traders who have at least 1-year trading history and a return somewhere between 10% and 30%. The trader should also be active enough that they are placing a minimum of one trade per week. This ensures that they are trying to grow their trading base rather than just locking your money in a single trade. If you want to spread out your risk you can spread out your copy trading between 2-4 different traders.
Who are the experts?
We carefully select expert applicants. We get to know them as a trader and examine their trading performance over a period of time. We also tend to look for experts who already have a following to further confirm their competence (social proof). You can also read about every expert on their individual performance pages.
Recommended amount to start with?
We suggest having around $3000-$5000 in your account due to exchanges minimum order requirements and so that you can at least cover the trading cost every month.
How does this work?
Here is how the copier works: You, as an investor, simply select an expert or experts that you want to copy trades from. Once you are signed up, this is the only action needed on your part.
Once you’ve taken care of the above, you are all set. There are no codes that you need to run or signals for you to manually input. Our software will handle the trade copying automatically on your behalf. We monitor your experts trading activity and as soon as there is a trade, we calculate all the necessary parameters and execute the trade.
The copier works based on trade percent amount. So, for example, if your expert takes a position in XYZ coin for a total of 10% of his account value and you are 100% allocated to that expert, then the copier will also execute a trade in your account in the amount of 10% of your account value.
The only thing you have to make sure of is that you have enough available base currency that your expert trades with, in your trading account. How much is enough? First, you must meet the exchange's minimum order amount (let’s say about $10 per trade to be safe). That means that if your expert executes a 5% order, you must have at least $300 in your account total value (at 100% expert allocation as an example). This also means that you need to have at least 10% or higher in available base currency to avoid missed trades.
When the expert exits a position, you too will exit it. Automatically. You can also change allocation at any time.
* Allows first time traders to familiarise themselves with the financial markets and gain the confidence to trade.
* Helps new traders to learn how to trade, by watching the actions of other, sometimes more experienced traders.
* Enables more experienced traders to take part in the market, even when they are too busy, and not able to invest the time and research they should normally devote to trading.
* You can copy trade on various instruments including foreign exchange, stocks, commodities and more.
* Creates a community of traders, beginners and experienced alike, who can exchange ideas, strategies and endeavour to improve their trades together.
Do you want some oil exposure as Saudi Arabia becomes prone to more acts of sabotage? Do you want to take advantage of intraday moves during Jerome Powell’s press conference? Or perhaps you are content with a quieter life, lower volatility, green investing perhaps? You can get whatever exposure you want, on your terms by tapping into a wealth of global expertise.
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