Mistakes to Avoid When Using a Copy Trading Platform

With the development of copy trading software, beginners find it easy to enter the financial market with actually no background or knowledge. The approach makes it easy to get started and brings a proven professional to follow his or her actions on the market and share profits on autopilot.

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The majority of copy trading strategies have already shown their efficiency. However, most amateurs still wonder what is copy trading. Besides, some of them still make common mistakes while choosing a copy trading platform or an introducing broker to follow. In this article, we will review some common issues to avoid when becoming a first-time copy trader.

Key Points to Consider with Copy Trading

Before getting started, you need to consider several crucial points that will define your further success and the opportunity to share profit with a pro while following his or her trades:

  1. Select a trusted copy trading platform. It means not only a perfect online reputation but also a team of experienced traders who are proven top-performers with an impressive track record of successful operations. You need to look for time-tested pros to follow instead of copying random devils.
  2. Avoid hype and traders who go viral or are extremely popular for any other reason instead of successful trading. Once again, random success is not proof of earning opportunities. Besides, some individuals use social trading as a tool to create noise around them to attract more and more beginners.
  3. “The fewer the better” does not work in copy trading. Experts recommend choosing several pros to follow as a chance to diversify your approach and make it more profitable. Additionally, it can work as a protection against unpredictable failures and losing all the capital right at once.

Also copy trading software was developed with the idea of making trading as seamless and beginner-friendly as possible, it still requires a careful, attentive, and smart approach, as investors solely depend on introducing brokers.

Selecting a Trusted Introducing Broker to Copy

The first step to make your copy trading strategies successful is to compare and contrast all available leaders or IBs to follow. The list of the following parameters will help you decide on the best one to follow.

Return Rate

The parameter highlights the profit a trader generates within a specified period shown in percentage. The overall dynamics can be either negative (showing losses) or positive (showing gains).

Activity

Using this parameter, investors can track the percentage ratio from the day a broker has opened the account to the current moment with all closed or running deals. If a broker does not perform actively, it may be a bad solution to follow him, as it may take a while before you share your first profit.

Followers (Copiers)

The community of following investors can also be a good indicator of the trader’s success. The more copiers a pro has the better it proves his performance. However, beginners should note that this parameter will not guarantee success remembering the ability of some brokers to create false noise around them.

Overall Completed Deals

It defines the total success ratio with all closed deals. The parameter is usually supported by detailed stats per each trade or can be filtered by a traded instrument. It makes it possible to figure out which market a broker is the best at.

IB Account Longevity

The account lifespan is also a good parameter to consider, as it may contain a sufficient track record of the history of the IBs' performance on a copy trading platform in question. The longer period is covered, the more trust a broker has.

The Bottom Line

The format of copy trading is becoming a dominating trend offering simpler and faster ways to enter the financial market. Of course, it does not guarantee success for everyone. Additionally, copy trading software is not a magic stick, as it also requires maintenance, configuration, and proper implementation of copy trading strategies. At the same time, with some basic parameters in mind, you can avoid common mistakes the first-time copy traders do as investors make their first steps in the niche.

This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.