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Forex trading guide: How does copy trading work?

You are employed in a company and this is your active income source. Other than a job, you want to be involved in passive-money making opportunities. What can these be? This blog explains how does copy trading work and lets you earn passive income.

The Simple Concept

As the name suggests, you are copying the trade parameters. On copy trading platforms, you will have access to various manager accounts where you will observe successful trades in their portfolio. You may pick any of them, deposit your funds and wait for the results. This is different from regular trading.

The regular way of trading is to make trades actively while this is done passively. Regular trading is time-consuming and riskier than copy trading so people prefer this option as easy and reliable. The investor is free to subscribe to any manager’s trading strategy.

While looking up the best trading platforms, consider the accreditations (which authorities are regulating the broker services), broker functionality and ranking, and what are the trading conditions (whether they are suitable for the traders; trade commissions).

Why choose copy trading?

You might have noticed that selecting a trader and copying trades is a simple task for a novice. The bulk of other top-tier forex copy trading brokers has a similar set of features, which can be figured out.

Although, consider that copy trading is also risky, same as other investment options. It is not recommended to deposit huge funds. Invest as much as you can afford to lose if the market collapses. You may indeed achieve a return comparable to that of a professional trader, but the risk of losing money exists due to market volatility. To stay safe, first, use the demo account. If the demo account goes well, then you can start copying trades in the real account.

Pros and Cons

Novice traders can take the most advantage from copy trading options. As it doesn’t require skills or experience, it benefits the same as it generates profits for the professionals. These are easy to use platforms offering multiple features including performance analysis. Financial markets are not moving in the same trend always and so early profit ratios cannot be accurately corresponding to the current market situation. By applying a few techniques, maximum benefits can be achieved.

Advantages

  • User-friendly platforms and multifunctional
  • Minimum threshold
  • Learning opportunities by following the professional trading strategies

Disadvantages

  • High-profit ratios booked early by the managers were under the favorable conditions of the market in the past and thus it doesn’t guarantee the same profits in the future.

Take Away!

Copy trading is recommended only under favorable conditions. If the company is offering a low-profit ratio for the manager and a significant share for the investor, then this sounds great. Some brokers divide the profit into 2 halves, 50% for the manager and 50% for the investor. Don’t get scammed by the high-profit ratios. You should not invest until you are sure about the credibility of the broker. Search for copy trading platforms reviews like iq option review, and select the best after going through the feedback.

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