Is Copy Trading Profitable: Copying ace investors and investing in the same companies has recently become all the rage. Different platforms such as Trade Brains Portal, Moneycontrol, and Trendlyne have provided the option of following the recent investments of big names such as RK Damani, Vijay Kedia, and the late Rakesh Jhunjhunwala. Now what if you could do the same thing, but for trading instead?

We’re talking about copy trading. But what is copy trading? How does it work and is copy trading profitable? We’ll be discussing the concept of copy trading, how it works, and other important points you need to know.

What Is Copy Trading?

When you start a career as a trader, you must come to terms with the fact that there will be days when you make as well as lose substantial sums of money.

Experienced traders are accustomed to this fact. But new traders cannot afford to lose their capital as it could end their trading career even before it begins. That means proper risk management.

Copy trading is a method of trading where new and inexperienced traders follow the trades of big names, in the hopes of making money using the moves of the bigger and more accomplished traders.

Copy trading does come with a certain fee, based on the platform and traders you choose to follow. 

All About Copy Trading

Copy trading is used by both new and experienced traders. The new traders use it to mirror the moves of big and experienced traders, and by doing that, they hope to recreate the returns they make as well. 

Experienced traders use it to learn the strategies of other traders, copy them and hopefully learn how to make similar returns from the market. 

It is ideal for traders who don’t have time to follow the market and do their own research. Beyond the stock market, there are other markets as well where traders exist and make money on a daily basis.

To follow every one of them would be tedious and overwhelming. Copy trading allows traders to follow multiple markets. Here are some of the assets you people can copy trade.

Assets Which Traders Can Copy Trade

  • Stocks: Stocks refer to listed shares of companies like Reliance, Tata Motors, Infosys, etc.  
  • Indices: Indices such as Nifty 50, and Bank Nifty are traded on a regular basis via futures and options. 
  • Commodities: Physical assets like oil and wheat and precious metals such as gold.
  • Forex: Currency pairs like GBP/USD, USD/EUR, and USD/AUD. The concept of copy trading started from the forex markets. 
  • Crypto: Digital currency tokens like Bitcoin and Ethereum.

Essentials Of Copy Trading

  1. First, you would need to open an account with a trustworthy copy trading platform. Each platform has its own metrics for picking a trader for their firm. 
  2. Choosing a trader to follow. After picking the platform, you need to find a trader to copy. Ideally, you should pick a trader whose goals, risk appetite, and style match yours. 
  3. Next, you need to set aside capital for your copy trading strategy. Ideally, it is safer to start with a small amount of money, gradually increasing over time. 
  4. Observation skills – Even though the strategies are not yours, it needs a basic level of understanding of how copy-trading works. You can either follow the automatic trade by selecting the asset, or you can manually copy-trade yourself. 

Is Copy Trading Profitable?

If you know what you’re doing, and follow the right traders, especially when it comes to real gains and well-managed risk, copy trading can be quite profitable.

Choosing the right trader is important because if his strategy fails, they lose money and so do you since you’re dependent on them for guidance. 

Keep in mind that trading, in all forms, is risky in itself. To copy-trade from someone else’s strategies, without knowing to do it yourself, is risky because you don’t know where your trades could go.

But you have the advantage of controlling how much capital to use, unlike mirror trading.

Advantages Of Copy Trading

Here are some of the advantages of copy trading:

  1. Diversification: If you’re a trader who sticks to a certain niche, be it options, forex, or stocks, copy-trading gives you the chance to diversify by copying traders with different expertise. On the off chance that your strategy causes you losses, you can compensate for it by using copy-trading. 
  1. Transparency: The copy-trading platforms give users statistics of the traders who are sharing their strategies, including performance, wins, and losses. This helps users decide which trader to copy. 
  1. Adaptability: Even though you’re copying the moves of other traders, copy-trading platforms allow you to decide the amount you want to invest. This option to reduce position size allows many new traders to participate without the same capital as the source trader.
  1. Time-Saving: Copy-trading takes less effort and research than trading by yourself. You are not required to learn the strategies but merely follow the same trades as experienced traders. This saves a lot of time and effort one would have to give to find the strategies themselves. 

Also Read: 10 Best YouTube Channels To Learn Share Market in India 2023!

In Closing

Copy trading can be an advantageous tool for all traders. You get access to experienced and profitable traders and you have the opportunity to follow their trades, without having to learn the strategy.

If you have asked yourself – “Is Copy Trading Profitable?”, the answer is not as simple as a yes or no. It has the potential to be quite profitable, but with its own risks.

Ideally, you must do your own research before parking your money into any venture. Happy Trading!

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