Copy Trading – What Is This Trading Strategy?

There are many types of cryptocurrency trading that both less and more experienced traders can use to achieve satisfactory profits. One of the interesting strategies, useful for a wide range of investors, is copy trading. This is what we would like to focus on in today’s text.

What is copy trading and who is it a good solution for? How to copy the movements of other traders? What are the popular forms of copy trading? What are related solutions – what is mirror trading and social trading? You can read all about this below.

What Is Copy Trading?

It is a trading strategy based on copying the transactions or the complete buying and selling plan of another trader, operating on the same trading platform (providing tools for copy trading).

Copy trading allows, by copying an experienced trader, to implement a strategy and achieve profits even for beginner investors, which is a particularly attractive advantage of copy trading. It is also a chance to limit the risk associated with any investment, also in the world of crypto.

Moreover, such trading strategies can be used not only in the case of cryptocurrency trading but also when one wants to acquire various financial instruments, for example, on the Forex market, in CFD transactions, or in trading stocks and other securities.

How to Start Copying Stock Transactions in Crypto – The Beginnings of Copy Trading for Beginner Traders

How to start benefiting from copy trading? The basis is, of course, to find the appropriate platform that allows copying a trader and his transactional movements. Among the most popular general trading portals that allow using copy trading to follow the best traders are:

• Avatrader copy trading,
• Saxo Bank Trade Signals,
• Darwinex Trader.

For cryptocurrency trading, however, it is useful to use the possibilities of popular platforms such as:

• eToro,
• ByBit,
• KuCoin.

Before choosing a specific platform (e.g., Avatrade copy trading or KuCoin), it is necessary to know its capabilities, the available trading options, and of course the commissions, in order to choose the most suitable solution for your individual needs. Additionally, it is advantageous to check who provides the market signals to the platform. Good signal sources are hedge funds, experienced brokers, and financial market experts. Reliable information and a database verified by the platform mean a lower risk for the investor using copy trading. Whether you operate on the cryptocurrency or stock market.

The next step is to find the right trader to copy – it is useful to examine their strategy, gather opinions, and as much information as possible to best protect your finances and investment portfolio and reduce the risk of capital loss. Indeed, the profits of the copying investor depend on the successes of the trader, their experience, their ability to analyze the market, and make good decisions. Moreover, even if you are not yet an experienced investor, but rather a beginner, it is always useful to acquire knowledge about how CFD contracts work or about the cryptocurrencies in which a given person invests, in order to better understand the trader’s movements. This can protect you from significant loss.

To start benefiting from copy trading, you therefore need to choose a platform and create an account there. Then you choose a trader and, using an automated tool from the copy section, you start copy trading. As soon as the trader makes a transaction, it is automatically replicated on your account.

How to Use Copy Trading – How Does Copy Trading Work?

Regarding the different forms of copying the transactions of other users, we can talk about two main paths of action. This strategy divides into:

• using automatic copying,
• manual copy trading.

Automatic copying of the trader’s movements is very popular and is the most often chosen option. However, carrying out transactions without the direct participation of the copying user does not exempt from keeping an eye on one’s portfolio and observing the actions of the chosen trader, who can also make mistakes (this happens even to experienced traders). Nevertheless, it is a solution also dedicated to beginner traders. In the second case, the investor decides to follow the actions of others. It is then not necessary to copy the entire portfolio of the trader. Instead, one can choose to copy the strategy of buying a specific cryptocurrency or individual transactions, coming from one trader or several players.

Social Trading and Other Strategies Related to Copy Trading (Social Trading vs. Copy Trading)

When discussing the different types of copy trading, it is impossible not to mention other strategies appreciated by investors. This mainly includes:

• social trading,
• mirror trading.

Copy trading is a form of social trading. However, there are certain differences between them, which are good to be aware of. Social trading is mainly communication between traders, informing each other about their possible investments, to discuss them together and analyze the given opportunity. Copy trading consists of using the option to copy the actions of the followed investor. In the case of mirror trading, we are dealing with the imitation of the trading strategy and specific action style of a given trader. The other two strategies, namely copy trading and social trading, therefore derive to some extent from mirror trading.

Copy Trading – Summary of the Transaction Copying Strategy

In the case of copy trading, your account is linked to the account of another trader to copy their behaviors and transactions, with the aim of making a profit. This allows implementing the transactional strategy of a more experienced investor, achieving better results in trading, and minimizing the risk of loss.

If you are looking for a way to diversify your actions in the world of crypto investments or are just starting your adventure, using copy trading or social trading, as well as being interested in mirror trading, can be a good way not only to generate passive income but also to acquire knowledge and new skills to use in the future.