A copy-trading platform allows a trader to copy trades from professionals who make regular profits, which can present an exciting money-making source that requires no practical knowledge of trading.
If you are looking for the best copy-trading platform in 2021, this guide is for you. Here you will find detailed information and a comparison of the best copy trading platforms. We briefly discuss how copy trading platforms work and we help you choose the right platform for you.
Our List of the Best Copy Trading Platforms
Here is our list of the best copy-trading platforms:
What is a Copy Trading Platform?
Copy trading is a practice of copying other traders’ trades, and a copy-trading platform is where you do it. Copy trading is popular among forex traders, therefore many forex brokers have built copy-trading features into their platforms. Traders can see the performance of successful traders and can choose one to copy the trades from.
A variation of copy trading is social trading, which makes the list of copy service providers publicly available. The next level is a social trading hub, which presents copy-trading opportunities from multiple brokers.
How Does a Copy Trading Platform Work?
In copy trading, investors can connect another “maser” trader’s portfolio to copy trades from them. The copy trading will be instant, and it will be executed automatically based on some conditions such as the percentage of risk per trade. For example, if you invest $5000 and set a 2% risk per trade, your trades will be executed at $100 risk per trade regardless of the risk taken by the trader whose trades you’re copying.
The most important aspect of the copy-trading platform is the list of master traders, who are ranked according to trading success. You can see each master trader’s trading history and trading style.
Since the copy trading happens automatically and centrally at the broker’s end (and/or on a VPS) there is little or no chance of missing any trades.
Key Features to Look For in a Copy Trading Platform
Let’s look at two of the key factors you should consider when choosing a copy trading platform.
The most obvious thing to look for in a copy-trading platform is the profitability of the listed master traders. Piggy-backing the trades of profitable traders is the whole reason you’re doing it.
Diversification is one of the cardinal rules of investing, and this should also apply when copy trading, so you should look for a platform that allows trading in forex, stocks, indices, commodities, and even cryptocurrencies.
Pros & Cons of Using a Copy Trading Platform
How to Choose the Best Copy Trading Platform for Me?
You want to choose a copy trading platform that lists the most profitable traders, but you should consider at what cost in terms of fees for the copy trading facility. Look for reviews — both positive and negative — of the service you intend to use. Also, consider using a copy trading platform that supports multiple brokers.
How to Safely Use the Best Copy Trading Platform to Make Money?“ As with any form of investment, diversification is key to keeping your money safe. Don’t allocate all your money to following a single trader (however successful) on a single platform. Spread your risk between different traders who employ different trading strategies on different assets. ”- Mircea Vasiu
In many ways, copy trading sounds too good to be true. You don’t have to learn how to trade, you just have to deploy your money to follow profitable traders who do know how to trade. No trader or trading system is foolproof under all market conditions, and many successful traders have blown up their accounts over the years, so it’s important to take steps to protect yourself. The best way to do this is through diversification.
Frequently Asked Questions
Not exactly. Social trading platforms let you interact with other traders without necessarily following their trades.
No. There are copy trading platforms for stocks (equities), commodities, indices, and even cryptocurrencies.
No. Algorithmic trading uses a computer program to automatically buy and sell assets according to predetermined instructions. Copy trading means automatically copying the trades placed by a real-life trader.
One thing to be wary of is survivorship bias. Any trader can have a long profitable run by sheer luck. The ones who do have a good run will rise to the top of the league tables and the others will fall away. So, for the ones who are left at the top, was it luck or was it skill that put them there?
A drawdown is the amount of money you lose on route to making money. Even trading strategies that make a lot of money in the long run (e.g., ten times your initial investment) can suffer losses of up to 50% or even more along the way. Such drawdowns can shake your confidence in the trader you’re following, so you’ll be inclined to take back what is left of your money before the profits eventually come. If they come.
All trading is risky, which is why you should diversify and — most importantly of all — never trade with funds that you can’t afford to lose and might need in the near future.