Is copy trading worth it?

Is copy trading profitable?

Copy trading is profitable if an investor can predict which traders will be successful and then copy their trades. The best Forex traders usually make from 5% to 30% per month. However, there is always the chance of losing money, since even experienced traders make mistakes. Markets are known for being unpredictable, and traders suffer liquidity risk as well.

Is copy trading free?

Copy trading is free on some platforms, however, some may charge a small fee for trading on their platform. This amount can vary from platform to platform. Some examples of free copy trading platforms are RoboForex and eToro, which do not charge any subscription fees for traders to copy trade.

How to choose a good trader to copy trades?

Copy trading might be an easy strategy to follow; however, choosing a good trader to copy isn’t. The Traders Union has mentioned some tips for choosing the best trader.

Trusted trader

The simplest way to spot a good copy trader is to look at how much confidence their followers have in them. Examine the amount of actual money that others have invested with them in order to receive signals from the trader. Furthermore, you should think about how much money those followers are making by following that signal provider. This information may be found on their profile page.

Generally, if a trader has a small number of copiers and followers, this is a bad sign, and you should avoid him. Furthermore, the most copied traders are not necessarily the best traders. Some just found methods to enhance their ranks by performing questionable actions such as manually copying the activity of other successful traders or opening many accounts and staying with the one that performed the best by chance.

Returns

Negative returns are obviously unattractive. However, while very high returns may appear attractive, keep in mind that yearly returns of 70% or more are rare and are most likely due to chance or excessive risk.

Examine the monthly returns to see if the performance is related to a particular month or months. Check out the profit charts of the traders. Choose the one having consistent rising profits.

Number of trades and open trades

Another factor to consider when selecting the best copy trader to follow is the number of trades the copy trader makes. A large number of closed trades (1000 or more) is a strong sign. A high value can help determine whether or not the trader is experienced and that their success is not due to luck. This is dependent on the trader's plan. Long-term traders prefer to keep their holdings for a longer period of time, resulting in fewer trades.

Professional traders understand when to accept losses and how to use stop settings to minimize losses before they become unbearable. A trader with few active trades and a winning percentage between 60 and 80 percent is more likely to do well eventually than one with over 10 open trades and a winning ratio of 100 percent.

Trader level

Some copy trading platforms rank their traders by levels, and to advance to the next level, the trader needs to meet specific requirements, such as managing the loss, increasing the amount of real money invested, maintaining consistent profits, etc.

The higher the level, the greater the confidence that the trader is professional. Furthermore, certain platforms permit copy traders to use demo accounts. Ensure you are copying a trader who uses real money.

Trading strategy and style

Make sure to read the profile description and understand the trader's investment strategy, it may or may not fit with your own. Assess completed trades to know his strategy. No trader is skilled in all markets, including Forex, stocks, indices, and cryptocurrencies. Look for a person who specializes in a small number of markets or commodities. To further diversify your portfolio, look for traders with similar expertise.

How much can I earn in copy trading?

Your earnings as a copy trader can depend on various factors. As a beginner, you will find it difficult to copy the trades of professional traders, hence, you may end up making low earnings. However, after choosing and copying professional traders, you might earn more.

As it said above, usually the best professional traders can make from 5% to 30% per month, however such a range is not constant. Remember that the risk of loss remains in any kind of investment.

Best copy trading platforms?

RoboForex

RoboForex Review

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Your capital is at risk.

RoboForex is a well-known copy trading platform that caters to many traders and is regulated by Belize (IFC).

RoboForex users like it because it is easy to use and has useful analytics for traders. It also has a low minimum deposit which makes it affordable. It has a $10 minimum investment, it has a significant network size of 1400 strategy providers. RoboForex takes a commission on all trades that go well, and the average commission is 40%.

RoboForex offers a social copy trading platform that serves as an affiliate scheme. You might get a partner commission if you send new members to the strategy provider.

But there are problems with using Roboforex. The filters aren't very good, and the commissions are expensive, which makes traders less likely to use them. Also, the broker is registered with a business that is based outside the country, which makes potential traders suspicious.

eToro

eToro Review

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eToro is a multi-asset investment platform. The value of your investments may go up or down. Your capital is at risk. Don’t invest unless you’re prepared to lose all the money you invest.

With the help of eToro's user-friendly interface, traders may copy the trades of investors across more than 2300 assets, including Forex, exchange-traded securities, well-known cryptocurrencies, and CFDs. eToro, which was established in 2007 and is licensed in two Tier-1 and one Tier-2 jurisdiction, is a reliable broker for trading CFDs and Forex. More than 12,000,000 traders use the eToro trading platform.

The integration of self-directed trading and copy trading into a single trading experience is its main innovation. With eToro, you can build a portfolio based on cryptocurrencies, buy and sell well-known stocks and ETFs, set up a meeting with your investors, and more. You can open one of four types of accounts on eToro with a $50 minimum deposit: a standard account, a micro account, an Islamic account, or a VIP account.

eToro is available on Web, mobile, and tablet apps, and its advantages are that it covers a large range of trading assets, has a cutting-edge platform, and is a highly regulated broker (CySEC, FCA, and ASIC). But eToro has some problems, like spreads that are a bit higher than usual and not having the MetaTrader platform.