Forex Copy Trading – Essentials To Know Before A Trade

Forex trade is a staple in the sphere of financial investment. Though it is considered rather risky, its beneficial nature keeps attracting more and more new users. Forex trade is not rocket science, yet it still requires time to learn all its features, and characteristics for the best performance. Most impatient investors, however, want to start the trade at once and get their profit. Such a contradiction led to a new branch of Forex – copy trading, which requires less knowledge and allows new traders to make money from the beginning of their Forex performance. Let’s learn how it works. 

What is copy trading?

Forex copy trading is one of the simplest forms of trade, as it involves the replication of steps performed by professional traders. Copy trading has existed for quite a long time in the form of ‘social trading’, yet it’s now, that it has evolved into a specific and recognized form.

It is common for new traders to elaborate on their trading style by learning from others and analyzing their transactions. Copy trading offers a more convenient approach – instead of numerous forums and discussions to study, there is a copy trading platform, where new traders register and follow traders-professionals. They simply copy all the movements, and as a result, get their hassle-free profit. 

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Copy trading is of great help for every new trader entering the Forex market, as it allows them to make their first Forex movements loss-proof. Let’s admit it, there is a lower risk involved when performing transactions by seasoned players than the ones who only make their first trading steps. 

How does Forex copy trading work?

Forex copy trade is based on the choice of a reliable trading platform and the traders to follow. 

The whole procedure is quick and easy:

1. Install the Justmarkets copytrading platform and fill out the ‘investor’ account. 
2. Allocate the finance. 
3. Find the traders to follow. 
4. Copy the trading patterns. 
5. Get your profit. 

Forex copy trading turns novice investors into managers, as their success depends on a proper choice of traders and their strategies as well as constant monitoring of the outcomes. Copy trading is flexible and versatile – there is no limit to traders to follow and whose trades to replicate.

Although copy trading is mainly oriented toward inexperienced traders, the professionals are also active participants, as it allows them to extend their knowledge of strategies and diversify their trading style. 

How to find a good copy trader?

Forex copy trade, at its core, is a good practice to follow, however, its success is fully dependent on the skills of the traders. Investors ought to study the traders’ profiles and choose the ones that meet their demands regarding ratings and pricing. The most important characteristics to look for:

1.‘Followers’ score

The number of followers is a sign of trust, yet, vigilance is also important. 

It’s worth checking up on a few profiles to see if the followers allocate real money, not just the ones from the demo accounts, and check the profits they get. All the information can be accessed through the profiles of traders and investors. 

Considering a rising trend of copy trading, some traders simply boost their rankings by fake followers or offer the trades manually copied from others. 

2.Returns

While everyone expects to see a high level of returns, balance is important. Negative returns are bad, yet, too positive should also be a bad sign – either related to scamming or highly risky trades. 

The profiles of the traders contain profit charts: the ones that show a steady and consistent rise will certainly deserve trust;  yet, those with spiky moments and constant ups and downs should be avoided, as they are simply trying their luck, while the traders-followers lose their investments. 

3.Number of trades 

The experience of a trader to follow can be measured by the number of closed trades. A good level starts with 100 and over, as it is a sign of consistency and knowledge.

Highly experienced traders may have a slow growth of the closed trades, as they usually follow the long-term positioning, which lowers the number of closed deals, yet, increases the profit. 

4.Risk score

A risk score is calculated by social trading platforms on a scale from 0 to 10 – the lower the better. 

When evaluating a risk score, ensure the traders have consistent levels over a certain period as it is the best sign of safety. It is also important to avoid traders who don’t implement the stop-loss function, as it is the most important principle of risk management. 

5.Consistency

Consistency is a valuable characteristic, as it shows dedication to Forex trade. It is better to narrow down the list to traders with at least 12 months of successful trades, with minimal losses. The beginners, however, should be avoided at any price, as their success is often the result of luck.

The final thoughts

Copy trading is a recent and most advanced form of Forex trade for beginners. It opens the world of trade for unprepared new traders, allowing them to replicate the steps of professional traders. The success of Forex copy trading is based on the quality of the copy trading platform and the mastery of the traders. If you are still doubtful about the trade, simply install the application and give it a go with a demo account.