Why You Should Think Twice Before Starting Copy Trading 💥

Yes, you read that right: "Do not start Copy Trading." In this article, I want to share my personal experience with copy trading strategies and apps.

I’m not here to blame any Forex traders or brokers for losses in copy trading; it’s a complex landscape, and many factors are at play. Let’s dive into the basics.

What is Copy Trading? 💦

Copy trading is a strategy where you mimic the trading styles of experienced traders. These traders may charge a fee for sharing their strategies, which can be a percentage of profits earned or a fixed amount based on the lot size traded.

For example, let’s say you’re "Mr. X," and you’re copying "Mr. T" on a copy trading platform. When Mr. T places buy or sell orders based on his strategy, those orders are mirrored in your account. There can be slight price differences due to slippage, which is common in trading. This discrepancy is usually outlined in the policies of copy trading platforms.

Eventually, when Mr. T closes his trades, you’ll also see similar results in your account, whether in profit or loss. Some platforms even allow you to close trades independently before your master trader does. However, you will still owe them a fee based on your earnings.

Should I Use Copy Trading? 🤷‍♂️

If you’re just starting your Forex trading journey, the answer is a resounding "No." I recommend creating your own demo trading account and developing your trading skills. Don't let flashy ads featuring athletes or celebrities sway your decision—many of them have little understanding of trading.

Copy trading means entrusting your hard-earned money to someone you may not know well. Conduct thorough research before choosing a master trader.

How Master Traders Can Mislead You 👀

Some master traders might close their trades just above the opening price to minimize losses, which could leave you in the red due to slippage. They may appear successful, but this tactic can result in negative outcomes for you.

Additionally, if a master trader invests a small amount ($50-$100) and you’re trading with a larger sum, you may experience larger losses if their trades go south.

Beware of traders who don’t use stop-loss orders, as this can lead to significant losses. Some may even use copy trading platforms solely to attract new investors for their own gain, pushing you into premium groups or selling dubious indicators once you’re onboard.

How to Minimize Risks in Copy Trading? ✨

You can reduce the risks associated with copy trading by keeping the following tips in mind:

• Check the master trader's profit history before you start copying.
• Note how long the master trader has been active on the platform.
• Look for a mix of winning and losing trades; an absence of losses could indicate poor risk management.
• Consider whether you can match the master trader’s equity balance for proportional trading.
• A higher number of copiers can be good, but it may also increase slippage.
• Seek master traders with expertise in specific currencies or commodities.
• Prefer traders who charge per lot size traded.

Maintain Your Copy Trading Account Daily

Always log into your copy trading app to monitor the progress of your master trader. Don't panic if a trade is running negative; markets can fluctuate, and your trader may have a strategy in place. However, if you feel your master trader has become inactive or isn’t placing stop-loss orders, it’s wise to close your open orders to protect your capital.

Try to maintain equity amounts similar to your master trader. If they add funds to their account, consider doing the same or reevaluate whether to continue copying them.

Summary

Copy trading can be an avenue for earning by mirroring experienced traders. However, it carries risks, especially if you’re not well-informed about how to choose a reliable master trader. Always do your homework to make informed decisions.