In addition to the time invested in trading, a trader cannot do without certain knowledge and skills. What coin is better to invest in? Will Bitcoin rise or fall in price? What will be the market situation over the next few days? How to keep yourself from unnecessary emotions which interfere with trading?
Almost every beginner always asked each of these questions. It generates uncertainty, and uncertainty prevents trading. Market research is often required to answer these questions, but copy trading can help bypass this need. That is why anyone who finds himself in such a situation will find a copy trading strategy helpful.
What Is Crypto Copy Trading?
Before we tell you how to make money on copy trading, the first thing you need to understand is what copy trading means. Copy trading, also known as the process to copy trade, allows you to follow and replicate the trading strategies of experienced traders.
Copy trading meaning it is a way of trading assets, which does not require the analysis of various charts and statistics. All you need is just to repeat the trades of an experienced trader. With copy trading, you can copy the trades of other successful traders, making it easier for beginners to participate in the market.
Copy-trading uses two methods.
The first method is automatic. In this case, the platform can automatically replicate the trades of the chosen trader in your account. The system will automatically copy each trade without manual intervention, ensuring that your portfolio mirrors the expert's actions in real time.
Manual method
This method is not particularly popular among beginning traders, but its essence is simple. A beginner chooses a trader whose experience he trusts, and that trader shares with him the information about his own trading deal. Such information includes:
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The asset being traded.
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The volume of the deal.
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Take profit level.
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Stop-loss level.
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Time of entry into the market.
The beginner receives this information, analyzes it, and decides for himself whether he should make this trade or not. If he chooses to proceed, he must execute trades based on the received signals. However, this method requires at least a minimal amount of knowledge to analyze the information and make decisions. Therefore, manual trading using copy trading is less popular than the following method which we are going to describe.
Automatic method
Beginners are increasingly using the automated copy trading method. All they need to do in this case is to choose a trader whose experience they trust.
Automated copy trading is done with the help of programs. It can be copy trading software that you install on your smartphone or computer, or a trading platform that has copy trading built into it. As soon as you hit the “Start Copy Trading” button, the trader automatically executes trades on your behalf, and the deals of the trader of your choice are automatically copied into your trading account. As a result, you get the same results as the trader you selected.
Even in the case of automatic copy-trading, you can always correct some parameters. For example, the volume of the trade. Because if you don’t have enough money in your account for the trades, you simply won’t be able to start the process.
This strategy will also be a good help for those who don’t have enough time to monitor the market. You won’t need to spend days and hours in front of the monitor, but simply start copy trading and go about your business.
After reading all the above, you may probably have a question. What are the benefits for those who allow copying of their trades?
In fact, this is very simple. For each transaction, you pay a small commission to your chosen trader. In other words, in addition to profiting from a successful transaction, he gets money from those who copy his transactions. For this reason, such traders try to raise their ratings. The higher his name is in the list of traders, the more likely it is that more users want to copy his deals.
Advantages and Disadvantages of Copy Trading
The pros of the copy trading strategy are quite obvious.
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Low initial requirements in knowledge and experience, as well as starting capital. Since copy trading is an automated strategy, it takes little time: you can trade and learn the basics of the market at the same time. A practical consideration is the minimum deposit required by the platform, which you should check before starting.
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Experienced traders can receive an additional profit from the information on their trades. Anyone can become such a trader - it is enough to gain the necessary experience and to rise in a rating as high as possible. Not without reason, copy trading is the main source of income for many traders.
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Full control over transactions. You can choose the amount and the quantity of deals, and time ranges for copying and also disable copying at any stage and close your deals by yourself.
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One of the opportunities offered by copy trading crypto is the ability to copy deals of several traders at the same time. Such copying allows you to diversify risks, that is, to diversify your trade by distributing it among different traders with different strategies and success. This approach supports portfolio diversification, as copying more than one trader helps manage risk and reduces the impact of poor performance from any single trader. Thus, if one trader loses, it can be compensated by the successes of other traders, whose deals are closed successfully.
However, copy trading also has disadvantages to which everyone should pay attention.
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The trader, whose signals you use, can make a mistake. Since experienced successful traders, as a rule, have at their disposal a big deposit for trading, a few losing trades are not critical for them. For the beginning trader, two or three unsuccessful transactions can mean the loss of the whole deposit. By concentrating your funds with a single trader, you risk losing a significant portion of your investment if that trader performs poorly.
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If you are planning to trade on your own someday, you will have to give up copy-trading, at least not to deal only with this type of trading. Beginners will not be able to learn the details of trading, practicing only automatic copying of other people’s deals. For an experienced trader, the lack of the need to constantly analyze markets leads to professional degradation.
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Some trading platforms must be turned on all the time when the market is working. That is, your computer must be on and the trading software must be running all this time.
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There is always a risk losing money when copying trades, especially if the market moves against the copied trades.
Therefore, when deciding whether you need copy trading, we advise you to weigh the pros and cons of this trading strategy.
How profitable is copy trading? It all depends on the success of the trader, whose trades you will copy. The more successful trades he makes, the more money you will get. Conversely, if his trading session is not a success, you will also lose money. Market fluctuations can directly impact your copied trades, so it is important to understand these risks. When evaluating traders to follow, consider their trading style to ensure it matches your investment goals and risk tolerance. Always review the trading results of potential traders to assess their past performance and consistency.
How to Choose Experienced Traders to Copy Trade
Usually, it’s easy enough to make a choice - give priority to the trader who is at the top of the rating. Every platform and every exchange that offers the possibility of copy trading has such a list.
However, there is a non-obvious point here. The more popular the trader, the higher the commission you will have to pay him. In addition, there are many traders, most of whose deals are successful, but they have not yet managed to reach the top of the rating. Also, their commissions will be much lower than those who are at the top.
Therefore, when choosing a trader, pay attention to the following parameters:
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The trading history duration, starts from 1 year. If the trader you selected has been trading on the exchange for a month or even less, we do not recommend choosing him. It is quite possible that he, like you, has not gained experience, and a large number of successful transactions - a coincidence of lucky circumstances.
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The number of subscribers - not many people will subscribe to the bad trader. In other words, the more subscribers a trader has, the more you can trust him.
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Trader's performance is a key metric, but it should not be the only factor in your decision. Consider how the trader manages risk and the markets they trade in.
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It is important to choose the right traders to copy, as selecting experienced and reliable traders can significantly improve your investment success.
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Stability. If the trader has been consistently showing profit in the past few months, there is no reason to believe that this will change in the near future. Remember that stability is more important than profitability. Indicators of stability can be:
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At least 60% of all transactions of the trader must be profitable (the more the better);
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The maximum drawdown of 25% or lower;
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Monthly income 10-30%.
The trader with these or similar indicators is good at risk management. Ideally, you should look for a professional trader who has demonstrated experience in managing market risk and navigating volatile conditions. The beginner with a small deposit will be comfortable earning with this strategy.
Risk Management in Copy Trading
Effective risk management is at the heart of any successful copy trading strategy. When you start copy trading, it’s crucial to set a risk tolerance that matches your financial goals and comfort level. Most copy trading platforms, including WunderTrading, allow you to customize your copy trading settings—such as the amount of capital you allocate to each trader, the maximum trade size, and stop-loss levels. By carefully adjusting these parameters, you can control your risk exposure and protect your trading account from significant losses.
Another key aspect of risk management is diversification. Instead of copying just one trader, consider copying multiple traders who use different trading strategies and have varying risk profiles. This approach helps spread your risk across different market conditions and trading styles, reducing the impact of any single trader’s losing streak. Regularly review the performance of the traders you’re copying and be ready to adjust your risk management settings as needed. By taking a proactive approach to risk management, you can make your copy trading journey safer and more rewarding.
Legality and Regulations
Copy trading is generally legal in most parts of the world, but it is subject to specific regulations that can vary by country and region. For example, in the United States, copy trading is overseen by regulatory bodies such as the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). To ensure your trading activities are compliant, always choose a reputable copy trading platform that is registered with the appropriate authorities in your jurisdiction.
It’s also important to be aware of the tax implications of copy trading. Depending on where you live, profits from copy trading may be subject to capital gains tax or other forms of taxation. Make sure to keep accurate records of your trading activity and consult with a tax professional if needed. By understanding the legal and regulatory landscape, you can use your chosen trading platform with confidence and avoid any unexpected issues.
How to Start Copying Other People’s Trades
The automatic trading platform WunderTrading is an award winning solution and is considered by many as the best copy trading platform for beginners. It has everything you need to set up your copy trading account and start copy trading quickly and effortlessly. With WunderTrading, you can access both the stock market and forex market through copy trading.
Here are detailed instructions on how to make your first steps in the crypto market using a coping strategy.
Creating an account
First of all, you need to create an account on this platform. As well as on the exchange on which you are going to trade.
Creating an account on WunderTrading is very easy. All you need to do is click the “Get Started” button. After that, the system will ask you to enter your name, email and create a password. A link will be sent to your email to verify your email address. Clicking on it, you will get to the WunderTrading website and will be able to log in to the created account. To activate your account and start trading, you will also need to meet the platform's minimum deposit requirement.
Creating an account on the exchange where you are going to trade consists of approximately the same sequence of steps, but may differ depending on the exchanges. Full instructions on account creation are always available on the exchange you have chosen to trade.
Connecting an exchange to WunderTrading
To trade through an automated platform, you need to connect it to your exchange. This is done using an API.
An API (Application programming interface) is a set of instructions that allows different applications to communicate with each other.
To connect any exchange to the WunderTrading platform, you need:
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Go to your exchanger and get API-keys. Usually this process is not difficult, in addition, at each exchange there is a detailed instruction on how to do it.
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Go to WunderTrading and open the "My Exchanges'' section and click "Add" under "API Profiles. Select your exchanger, insert the received keys and click "Add".
Selecting the professional to copy deals from
On the WunderTrading website, go to the “Marketplace” section and select the “Manage Copy trading” section.
From the rating of professionals, select the one whose deals you plan to copy. These professionals are often more experienced traders whose strategies you can replicate. You can use various filters to make your selection easier. You can always choose several traders to diversify your risks. Alternatively, you may consider following signal providers, who generate and distribute trading signals for others to follow, either manually or automatically.
Some traders offer trading signals, which include specific entry, take-profit, and stop-loss levels. These trading signals can be followed manually or set up for automatic execution, depending on your preference and platform capabilities.
Once again, selecting a trader is a very important process, because your profit depends on their knowledge and experience. We recommend you read the section telling you what you should pay attention to when choosing a trader. Additionally, some platforms offer mirror trading, an automated strategy where you can copy algorithmic trading systems created by multiple professional traders, providing a systematic approach to trading.
After that press the “Start CopyTrading” button. The deals of the trader you chose will start to be copied into your trading account automatically.
Monitoring and Adjusting Your Copy Trades
Once you’ve started copy trading, ongoing monitoring is essential to ensure your trading performance stays on track. Most copy trading platforms provide real-time data and analytics, allowing you to review the performance of your copy trades, track profit and loss, and assess your overall risk exposure. Make it a habit to regularly check your trading account and analyze the results of the traders you’re copying.
If you notice that a trader’s performance is declining or that your risk exposure is higher than you’re comfortable with, don’t hesitate to adjust your copy trading settings. This might mean reducing the amount of capital allocated to a particular trader, changing your stop-loss levels, or even switching to a different trader altogether. By staying actively involved and making timely adjustments, you can optimize your copy trading strategy and better manage the risks involved.
Withdrawing Profits
Withdrawing your profits is a straightforward process on most copy trading platforms. Once you’ve accumulated gains in your trading account, you can submit a withdrawal request through the platform’s website or mobile app. Common withdrawal methods include bank transfers, credit cards, and e-wallets, giving you flexibility in how you access your funds.
Before making a withdrawal, it’s a good idea to review the platform’s withdrawal policies and any associated fees, as these can vary depending on the method you choose. Some platforms may have minimum withdrawal amounts or processing times to consider. By understanding the withdrawal process and planning accordingly, you can easily access your profits and reinvest them in new trading opportunities if you wish.
Tips for Success in Copy Trading
To maximize your chances of success in copy trading, it’s important to follow a few proven strategies. Start by selecting a reputable copy trading platform that offers a wide selection of experienced traders, transparent trading history, and robust risk management tools. Diversify your portfolio by copying multiple traders with different trading strategies and risk profiles—this helps you gain exposure to various asset classes and market conditions while reducing the impact of any single trader’s losing trades.
Set a clear risk tolerance that matches your investment goals and financial situation, and use the platform’s copy trading settings to manage your risk exposure. Regularly monitor your copy trades and be prepared to adjust your strategy as market conditions change. Stay informed about the latest trends in the financial markets, and don’t be afraid to adapt your approach as you gain more trading experience.
Copy trading is a powerful way to participate in the financial markets, whether you’re interested in trading forex, stocks, cryptocurrencies, or other financial instruments. By leveraging the expertise of professional traders and using automated trading tools, you can trade profitably even if you’re new to online trading. Remember, while copy trading offers many advantages, it also involves risks—so always practice sound risk management and keep learning to improve your trading skills. With the right approach, you can make the most of your copy trading journey and work towards achieving your investment goals.
Conclusion
Now you know how copy trading works and how you can start earning with it. It is a strategy whereby the trader copies the deals of other traders who are deemed to be professionals. However, before you start using this strategy, you need to consider the risks and benefits, as the profit of asset trading is directly dependent on it.
