Make Easy Money, Is Copy Trade Really As Divine As You Think?
Key Points:
Copy trade is a popular trend in the cryptocurrency market, where traders can mimic the trades of successful investors in order to make profits.
It is often promoted as a simple and low-risk way to invest in cryptocurrency, but it may not be as effective as it seems.
Copy trade relies on the assumption that successful traders will continue to make profitable trades, but this is not always the case. Even experienced traders can make mistakes or suffer losses.
Copy trade platforms often charge fees for their services, which can eat into any profits made through copying trades. Copy trading can also be risky for the original trader, as they may feel pressure to make profitable trades in order to maintain their reputation and attract more followers.
The article suggests that while copy trade can be a useful tool for beginner investors, it should not be relied on as the sole strategy for investing in cryptocurrency.
Surely everyone is intrigued to hear that you don’t need to spend a lot of time learning analytical techniques or constantly monitoring the market, and your account can still increase many times on its own, thanks to the experience of professional traders. Those are the beautiful thoughts when introducing the “Copy Trade” feature. But you must determine that everything has certain risks, especially in investments that cannot be easily profited without experience. So let’s find out if Copy Trade is really as divine as its introduction, what are the potential risks?
What is Copy trade?
Copy trade means copy trading, this is a form of trading where an investor will copy the position of another professional investor in the market (pro trader or master). When copying you can choose to copy part or all of the position.
The purpose of Copy trade is to profit from the right investment decisions of others, without spending time or effort on market research. If they win then you will also make a profit. But there are no guarantees, because even the best traders make mistakes. Therefore, if you copy their position, their loss will also become your loss.
How it works
Copy trade can be divided into many different forms such as:
Automatic Replication: All operations performed on the Master’s account will be automatically performed on your account.
Semi-Automatic Copying: Get notified of the operations performed on the Master account based on the selected signals and you can choose what to copy.
Manual Copying: You decide for yourself who to copy and which trades are copied, suitable for experienced traders.
Entities participating in Copy trade
This is not only an action between a copyist and a copy donor, but also an intermediary that makes the connection.
Pro trader/master: also known as signal provider or copy trader. These people will execute trades, manage orders and have the task of showing their entire strategy to others to copy. If the trade is successful, they will receive a percentage of the commission from the copier and from the broker.
Copier: They will proceed to choose the account to copy and decide how much capital to invest in an order, proceed to copy part or all of the master’s strategy. If the trade wins, you must deduct % of the profit for the pro trader/master that you copied the trade.
Brokers: Brokers will provide copy trading platforms and leaderboards of profiles of Pro traders/masters based on their success over a period of time. Brokers will collect transaction fees and account management fees from Follower and Master. If the trading volume is large, they will have to pay a commission to the Masters.
Benefit of Copy trade
For copyists
Simple, easy: Copiers don’t have to follow charts, analyze the market and strategize. This is all done by your Master. The only thing you need to do is learn about the people you copy, see their win rate over a certain period of time, then follow.
No experience required: It is precisely because investors do not have to do any other analysis that even newbies can easily join and make a profit.
Doesn’t take much time: Because you don’t have to analyze the market and monitor charts regularly, it helps investors save a lot of time for other jobs.
Only pay commission when profitable: Investors only pay commission when the copied trade is successful. Otherwise you only pay the transaction fee for the Broker.
Benefit from the experience of others: Entering the market without experience is extremely dangerous. The lack of knowledge will make your account fly quickly. But when copying you will benefit from the experience of professionals, pro traders. They will be the one to analyze, strategize and you only need to extract 1 winning part to pay them.
Can learn a lot of knowledge and experience: From the strategies shared by the masters, investors will learn more knowledge. From there, you will increase your self-worth more every day.
However, in order to achieve these benefits, the user himself when participating in this feature must also have certain knowledge and assessment ability to choose the right master, otherwise you can make a decision, otherwise your investment decision is entirely up to luck.
For master
The biggest benefit for the masters is to receive a percentage of the commission from the Followers (copy investors) and a part of the fees from the Brokers.
For exchanges
The exchange will provide a copying platform for the Followers to copy the Master’s orders. Followers will be responsible for paying fees to maintain the copy platform. This is also the benefit that the floor receives in the copy trade.
Risks when copying trade
Copy trade brings benefits to all 3 participating entities, but when calculating the risk, it is more in favor of the copyist. Here are some of the risks you will face when copying trades.
Risks when choosing a copy account
Risks from choosing a Master account to copy trades: Because if you choose an unreliable copy account, the trader will have to take a huge risk.
Losing a lot of costs: In addition to the spread, commission, and swap fees, when copying trades, investors also have to pay copy trade fees for brokers and commission percentages for Masters. If you do not know how to manage capital, the profit earned after each winning order is not much.
Difficult to control the account: It will be difficult for traders to control their profit and loss when they completely entrust it to Pro trader/master.
Risks from the market
The market is constantly changing and it is difficult to accurately predict the direction of the price, especially when it is believed. Therefore, a trader no matter how good he is, cannot be sure that all his predictions are 100% accurate. When copying trades from professional traders, you still run the risk of losing your account if the market is volatile.
Risk of improper capital allocation
Many investors because they trust the Masters so much that they run out of all their accounts. This is extremely dangerous if you choose the wrong Master to copy. It is best to allocate capital properly and follow capital management strategies.
Risks from the broker
Not only copy trade, but for any type of transaction, investors always have to face risks from the broker. If you are unfortunate enough to choose an unsecured broker, you will risk losing both capital and profit.
Notes to minimize risks when participating in Copy trade
Choose a real “pro” trader
Choosing who to copy is one of the most important decisive steps to determine the success rate when you join the Copy trade. Here are some criteria you can consider:
Investment performance over time: You should check the trading performance of the pro trader you are interested in for at least 12 months. The longer the trading period, the more data you can use to study the behavior and trading results of that pro trader.
Profit: Look for pro traders with consistent rather than sporadic trading results. You can do this by looking at their performance charts. Does it show an ascending or a spike? If it spikes in a short time and then drops again, this is not a good signal.
Number of followers: If a pro trader has a large number of followers, it can be a sign of a successful trader. Of course, the final trading decision is always yours.
Risk Level: Choose a pro trader with a similar risk appetite as you. Check if they use stop-loss orders and other risk management tools, and see if their trading behavior aligns with your investment goals.
Post-Loss Behavior: Profitable trades prove a successful pro trader’s trading strategy. However, losses are still possible. It is important to consider that trader behavior in different market conditions, even when the market goes against their strategy.
Follow many different pro traders at the same time
Then you combine with the good pro trader selection methods I mentioned above and you have a list of pro traders to follow and copy them.
In my experience, you should follow 3-6 pro traders, including 1 – 3 Scalping Trader and 2-3 Swing Trader to limit risks as well as balance profits in the long term.
Capital allocation when copying trade
After you have a list of pro traders to follow, you need to pay attention to how to allocate capital to optimize profits.
You can put a part of your capital to test the pro traders in the following list to test their trading performance for a certain period of time. If any pro trader has a steady performance then you can consider increasing your capital. If any pro trader is too bad or loses too much, you should boldly unfollow.
Still need time to follow up
When the Master account executes the order, the Follower’s account is also automatically executed with the entry level, stop loss, take profit… Check the copy account’s transaction data such as capital, net profit, orders. opened and closed. From there, the follower can stop copying or exit on his position if the trading master makes a loss.
Therefore, you can also be proactive in continuing or stopping this feature to avoid the risk when you don’t trust your pro trader’s strategy or see signs of a lot of loss.
Conclusion
Above are our shares about the Copy trade feature. In general, this is a pretty safe feature for traders with little experience or those who have little time to participate in the market but still want to place orders and earn passive income. However, this is also a very risky tool that you should not entrust your assets to the exchange or the masters. Please consider carefully before making any investment decisions.
Hope the article is useful to you. If you have any suggestions, please leave them in the comment section below to make our article better.
DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your research before investing.
