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If you are one of those who loves to copy and paste to solve things in life, this article on what is crypto copytrading can be very useful.
I consider myself to be one of the lucky ones who uses copy and paste for everything. I don’t like to make the same mistakes that people have made before me, because it would be a waste of time.
So, first I spend my time observing how the successful ones do it, then I copy them and once I have it figured out, I start putting my own stamp on things.
That’s what this article is all about. Crypto currency copytrading is a mechanism that serves to copy exactly the buying and selling strategies of successful crypto investments, through a certain platform.
It is a question of just leaving the ego aside, and of learning from the success of the others.
What does copytrading mean?
Copytrading means copying the open positions of one or more inverters into trade cryptocurrency automatically, within a network.
To do this, the copying trader has his account linked to that of the original investor. In this way actions such as buying or selling crypto currencies are executed synchronously in both profiles.
In most cases, the copier of the cryptocurrency exchange has the flexibility to stop the copied trades and manage them on his own. This means that you can end the copytrading-based relationships that have been initiated, as you see fit.
Original investors, whose trades are being copied, often earn commissions (through month-to-month subscriptions) as compensation.
There are several platforms available for crypto exchanges, and they use a wide range of options to facilitate trading. Several copy trading platforms allow traders to place stop loss orders even if they make a full copy, so that they can exercise control over their potential risk.
It is true that this may be a little difficult for those just starting out in the world of trading, but this type of mechanics is a true reflection of why trading has increased in interest in recent years.
Copytrading is a popular option for traders and there is a large active community if you want to exchange opinions or advice.
How does copytrading work?
Users must copy the strategies with the automated system of the chosen platform.
When a trader makes copy trades, a part of his wallet is linked to that of another user, and all his open trades can be copied from one account to another. All future actions will also be automatically copied.
Let’s take the example of how copytrading works on one of the most recognized platforms, EToro:
Let’s imagine that person A has extensive experience and success in the market and there is a new trader: person B. Trader B is a novice, without any trading strategies, but he still wants to invest his money in the market and not just buy cryptos in the hope of making a profit by holding.
Trader B has 2 options:
- Trade blindly hoping to make a profit.
- Copy successful traders after analyzing them for some time.
If I were Trader B, I would choose option 2. There are other factors that I would take into account such as diversification of investment, money management and choosing carefully the person you are going to copy.
A trader can imitate a maximum of 20 traders, but the minimum investment amount is $50 for each trader copied. So once trader B chooses to copy trader A, any trade that A opens in his account will be opened in trader B’s account.
Suppose trader A has $1000 in his account and opens a trade for $200. Now let’s suppose that operator B has $200 dedicated to copy operator A, then the same charge on operator B’s account will be equal to $40 (20% of the equity). Every time trader A closes a position with profit or loss, the same position will be closed on the copiers as well.
It’s that simple.
Is it safe to copy trade?
Like everything in crypto trading, copytrading also has its risks. That is why it is important to practice it on known platforms that have proven to have a reliable track record in the market.
Sometimes it is better to give up a little money (e.g. by choosing to pay more commissions) but make sure that the platform will work as it says.
Never forget to also consult the opinions of specialists or google what the general public has to say about a certain platform.
If at first you don’t feel too safe trading on copytrading sites, don’t worry as on most platforms there are numerous security solutions. A good example is “Copy Stopp Loss” which will stop copying strategies once a previously established maximum loss level has been reached.
Another recommended practice for newcomers is to copytrade without risking money. How? Certain platforms allow you to trade without risking your money, by opening a test account that trades with free virtual money.
This way you can practice without risk until you understand the mechanism of operation.
What are the advantages and disadvantages of copytrading?
Pros of copytrading
– Copy trading is a simple way to enter the market of crypto assets trading as it requires a minimum of experience and knowledge.
– You don’t have to be a successful trader or analyze every market movement on a daily basis, as the successful investor will do this for us.
– Generally, novice traders get carried away by emotions, but thanks to copytrading you will have the coolness of an experienced trader.
Cons of copytrading
– It’s not easy to find the right trader as there are a lot of traders with different strategies and results.
– You are not in charge and the trader you choose will take control of your investments. You need to trust and know how to delegate.
– As always in copy trading and social trading, there is innate risk as no one can accurately predict results. Even if you are an experienced trader, success is not guaranteed.