What is a successful Forex trade? Good knowledge of basic movements and common strategies, awareness about global matters related to economic and political conditions, vigilance about geopolitical changes on the global scale, and flexibility – seems rather daunting, doesn’t it? However, Forex society has developed a new and more comprehensible direction – copy trading, which offers all the benefits of Forex trade yet requires less preparation.
Let’s learn about it.
Copy trading is one of the recent forms of Forex trade, which is based on copying the transactions performed by other traders. It involves a professional trader, with a decent track of closed deals and a trader pioneer, who just starts the way into trading.
Copy trading has developed from a so-called ‘social trading’ when the traders would simply exchange their thoughts and ideas regarding the market. At the time, copy trading is performed through licensed platforms, where the new traders (investors) are matched with professional traders, and simply follow their transactions automatically or manually.
Forex copy trading sets no limits for the traders to follow, thus, which allows to allocate money with a few professionals and get profit respectfully.
Forex has long been known as a form of financial investment, yet now it has reached a more advanced and settled form. Active trading turns into a more passive form, focusing on finding the right trader to follow and enjoying the profit. It is important to understand that copy trading will require additional commissions, thus, lowering the profit, yet it is still a good deal.
What are the advantages of copy trading?
1. Easy start
Unlike the traditional form of Forex trade, there is no need to dig deep into the Forex terminology, and strategies, and develop an understanding of available practices. Trading starts right after setting up an account with Justmarkets copy trading platform.
2. ‘Beginner-friendliness’
The initial period of Forex trade is always complicated and risk-involved, considering the novelty of the whole trading environment. With copy trading, everything becomes much easier, as novice traders might start with the moves professionals perform, thus, eliminating the primary fear of trades.
3. Versatility of strategies
Copy trading allows new traders to learn from numerous strategies by following a few professional traders and tracking their performance. If they are planning to move on with individually performed trades, it is a great chance to try a variety of approaches and choose the one that fits their trading style.
4. Practice
When entering the Forex market, there are a lot of new things to learn, which seems rather frustrating and too complicated. The majority of trading platforms offer demo accounts, yet they don’t seem to be enough for decent practice.
Copy trading, apart from profitability, gives a chance to observe how all the rules and principles work in a real market, thus, lowering the complexity of a new venture.
5. Passive income
Forex trade has always been considered one of the most profitable forms of financial investment. Copy trading, however, turns it into a passive form of income, as traders’ role is significantly reduced.
The disadvantages of copy trading
Forex copy trading offers a great number of benefits, yet it does have one significant drawback caused by human factors.
The success of such a ‘lazy’ approach is entirely dependent on the skillfulness of other people and nobody is immune to mistakes. Therefore, while expecting profits, it is still important to be ready for losses. To avoid such a situation, choose carefully the traders to follow, analyze their performance, and monitor the tendencies of the market. Complete ignorance may be too costly and risky.
The takeaways
Forex copy trading is a new tendency in the Forex market, which allows new traders to start the trade minimizing the risks of the initial period and time for learning all the Forex market ins and outs. Copy trading helps everyone to join the Forex market regardless of their knowledge, and lets them observe the Forex trade and the way it works.
Some investors choose to stay rather passive and inactive, just copying the positions and getting profit; whereas others use copy trading as an educational opportunity, as they are exposed to a variety of new approaches and strategies to try. It can help them create their plan of action, and move on to independent trading.
About the Author/s
The New Jersey Digest is a new jersey magazine that has chronicled daily life in the Garden State for over 10 years.
