Understanding Copy Trading

Online trading is nothing new these days and needs not much of an introduction. Many of us do trading either ourselves or through a broker and this is something pretty common however what matters is whether we have the sound knowledge of trading or not? A lot of us understand the basics of online trading and have a fair knowledge on how to deal in stocks without having to consult or depend on others while others may not be an expert in trading at all. It is better for them to seek an expert’s advice or to consult others in case they trade in stocks in order to ascertain that their investments are safe and they are not indulging in loss-making ventures. But how about if we talking about something smart and Yes, Copy Trading is one such concept where you can trade exactly like an expert. Copy Trading in a simple language is a highly innovative form of trading where one trader automatically copies the trade of another expert trader which they believe are experts and successful. The copied trader who is often termed as “Signal Provider”. Generally, the signal provider is a member of a social trading network or a trading platform hosted by any online trading brokerage. Copy Trading is also known as Mirror Trading.

Is Copy Trading Legal /Legitimate

Though Copy Trading looks so simple and easy as all it needs to be done is simply follow and copy the trades of few talented and highly ranked traders so whether Copy Trading is legit or not is still to figure out.

Initially, we need to go ahead and understand that there is always a risk involved in trading and investing and even the most experienced and successful traders can witness losses in their trade. So, whether it is safe to indulge in copy trading and especially when it looks so lucrative but let us also look at the practical side of it where we need to accept it does not always guarantee profits and anything can happen in the financial markets. So whether copy trading is legal or not the answer is Yes, it certainly is.

Is Copy Trading Safe?

While understanding whether Copy Trading is safe or not it is important for us to know that what are the underlying risks in the complete trading process. It is clear and we need to accept it purely that it is never a guarantee that a trader is always going to make a profit. Any trader needs to accept this any historical data or performance of a particular trader is not indicative of future results and therefore ay trader might be on an excellent form however its fortune may easily reverse and thus do not blindly follow all trades thinking that you are bound to make a profit.

Each trade is different and subsequently one may book profit or loss and the Signal trader has a thorough knowledge of what trade he/she is doing as per his/her experience. So while choosing a trader whom you will copy what is important is that how much of capital you would want to risk. The trader you are copying may have a big portfolio and he/may trade keeping in mind while your portfolio may be of different size and thus you need to keep this thing while copy trading considering the risk factor. Supposedly if the trader places a trade on a commodity and you are mirroring his trade you need to know that you never make the mistake to risk your entire bankroll on that trade. In addition to this, you should also consider the amount that the actual trader is willing to risk themselves is important as if the trader experiences good results they are only risking a small amount of money and they are confident of their ability to recover in case they book loses. In the end, one should study what is the ROI that the actual trader is making on his investments as well as the breakdown of the amount of volume the trader is making on a monthly basis.

So, Copy trading is good until you use your senses to copy trade in the best of your limits. 

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