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What is Copy Trading: A Guide for Beginners

TABLE OF CONTENTS

What is Copy Trading: A Guide for Beginners

What is Copy Trading: A Guide for Beginners

Vantage Updated Updated Tue, 2024 July 2 08:42

Copy trading is a well-established concept in the global financial markets, supporting a large and rapidly expanding marketplace projected to reach a valuation of $3.77 billion by 2028 [1]. Copy Trading is a form of communal investing that allows you to automatically replicate the trading activities of another trader. 

In recent years, it has become a popular tool for users to earn commission and a simple strategy to diversify one’s portfolio. 

Who participates in Copy Trading?

There are two main roles in Copy Trading which are Signal Providers and Copiers. 

Signal Providers are traders who publicly share their portfolios for others to copy, and in return earn from profit shares. 

Their main task is to build attractive strategies that suit a Copier’s trading style, taking into account factors such as risk tolerance, product interest, capital and more.

Copiers are traders who mirror a Signal Provider’s real-time trades. 

For them, Copy Trading serves as a convenient way to participate in the markets without needing to actively be involved and make trading decisions. 

They can copy multiple Signal Providers at a time, creating an ultimate, diversified portfolio. 

Both participants mutually benefit from one another, creating a community of like-minded investors who are keen to keep the markets rolling. 

This method leverages the expertise of experienced traders, enabling even those with limited knowledge of the financial markets to participate in trading. By mirroring the trades of seasoned professionals, beginners can potentially achieve similar returns, all while learning about trading strategies and market behaviour in real-time. The rise of digital trading platforms and social trading networks has made copy trading more accessible than ever, providing a user-friendly entry point for aspiring traders. 

In this beginner-friendly guide, we’ll explain how Copy Trading works and how you can get started. 

Introduction to Copy Trading for Beginners

Copy Trading is an innovative approach to trading that allows beginners and experienced traders alike to benefit from the sharing of knowledge and expertise. By definition, Copy Trading involves the process of automatically replicating or mirroring the trades of a selected trader within the trading platform. Upon selecting a trader to copy, their positions are duplicated within the Copier’s trading account. Every subsequent trade executed by the trader is then replicated in the copier’s account through an automated process.  

As the popularity of Copy Trading grows, it has become a sought-after tool for those looking to dip their toes into the world of trading. For beginners, this allows them to benefit from traders with more experience and insights which may help them gain a better understanding of the market and develop their own trading strategies. 

Copy Trading vs Manual Trading 

Manual Trading and Copy Trading differ in the complexity and involvement of traders. 

With Manual Trading, it’s you against the markets, and your profits and losses are solely your own. 

On the other hand, Copy Trading fosters a collaborative effort between Signal Providers and Copiers to navigate the markets and mutually benefit from potentially profitable strategies. 

Is Copy Trading suitable for me?

Copy Trading is suitable for any trader of all levels of expertise. 

The role you choose depends on what you aim to achieve through Copy Trading. 

If you are: 

  • New to the financial markets
  • Looking to participate in the markets but do not have the time
  • Wanting to trade a particular market session, but it’s always closed when you’re awake
  • Wanting to avoid monitoring price movements all day
  • Prone to making emotionally driven decisions
  • Not sure how to build a strategy
  • Looking for ways to diversify your portfolio
  • Preferring someone else to handle your trades for you

then you would suit the role of a Copier.

If you are: 

  • An experienced trader
  • Looking for new avenues to earn more profits
  • Building a profile as an analyst or investor
  • Building a community of followers
  • Earnest in encouraging others to participate in the markets
  • Familiar with portfolio-building and trading strategies

then you would make a fantastic Signal Provider.

Benefits and Limitations of Copy Trading

Copy Trading is undoubtedly one of the most significant steps toward financial accessibility. 

New and experienced traders have the opportunity to benefit from copying positions, interactivity, and sharing strategies. However, Copy Trading is not without its flaws. 

Benefits of Copy Trading 

#1 Diversification 

The rule of thumb in trading is to spread your capital across a few instruments to diversify your portfolio. In Copy Trading, your portfolio is multi-levelled: Signal Providers would have diversified portfolios and in copying multiple Signal Providers, you would have layer upon layer of diversification. 

#2 Time-Saving 

Constantly monitoring price movements is a thing of the past. With Copy Trading, you can save months of research and learning by replying to the expertise of experienced traders. Plus, Copy Trading negates the need for an overtly expensive fund manager and instead benefits from the collective wisdom of the crowd. 

#3 Accessibility 

Copy Trading opens the gates for retail investors and new traders alike to access the financial markets with ease and confidence, expanding the circle of accessibility. Even experienced traders who want to enter a new market can copy a Signal Provider first for a taste before diving head in. 

Opportunity to learn from Professional Traders 

Copy Trading provides the opportunity to observe and learn from the more experienced and accomplished traders. By following lead traders with a proven track record, you can learn about their trading strategies and techniques, which can be beneficial in developing your own trading skills. 

Limitations 

#1 Experience 

Copy Trading has been praised for its ability to act as a quick pass to trading, but its most significant flaw lies therein. It comes with the expense of experience. Copiers’ dependability on their Signal Providers downplays the need for financial literacy to navigate the markets on their own safely. This jeopardises their capital without the safety net of knowledge and emotional maturity to develop a risk management plan. 

#2 Control

Entrusting your funds to a Signal Provider does not guarantee a return. Though you have control over the exposure through lots and margins via Copy Mode, your success is still in the hands of the original strategy made by the Signal Provider. The balance between optimism and caution is something every trader, even a Copier, must make. 

Copy Trade with Vantage

We have recently launched an updated version of our Copy Trading system on 2 April 2023. The new App-based system is packed with a plethora of exciting features and improvements that traders of all experience levels will appreciate. Vantage has re-engineered the app to ensure enhanced stability and faster execution speeds than ever before. To add to this, the Copy Trading section has been given a complete overhaul and now offers a much more user-friendly experience, with a comprehensive array of information on display. 

How Does Vantage’s Copy Trading Work? 

Now that you are aware of the two roles involved in Vantage Copy Trading, let’s explain how Copy Trading works. Using Vantage’s Copy Trading function, Copiers will be able to mirror the trading activities of Signal Providers that they choose. For instance, if the chosen Signal Provider is trading 1 lot of Apple stock on a given day, it will be reflected back into the Copier’s Copy Trading account. This is essentially how Copy Trading works. 

By utilising the Copy Trading function, Copiers can gain first-hand trading experience to a diverse range of products across various markets, such as shares, commodities, indices, forex, and cryptocurrencies, without solely relying on extensive market research or analysis. This powerful function allows novice Copiers to reap the benefits of trading without the burden of manually identifying products to trade. 

Moreover, there is a broad selection of Signal Providers available, ensuring that Copiers can find Signal Providers with a trading style that resonates with them using Vantage Copy Trading. Copiers can learn from the best and build on their Signal Providers’ knowledge and experience. Vantage Copy Trading is also helpful for those who have limited time to monitor the markets daily. By copying a Signal Provider, traders can continue to execute their trades without having to actively monitor the trades on their own. 

3 Tips to Get Started with Copy Trading 

For beginners, here are three things to consider before getting started on Copy Trading: 

  • Diversify by copying multiple Signal Providers 

Diversification is just as important to Copy Trading as it is to conventional trading. You should avoid placing all your eggs in one basket by following a single trader. Instead, you may allocate your trades across multiple traders with different trading styles, strategies, and assets to invest in. It is advisable to carefully consider every lead trader’s historical performance, risk tolerance, and trading strategy before entrusting your funds to anyone. Having a well-rounded and diversified Copy Trading portfolio could help mitigate the risk of exposing your entire capital to a single Signal Provider.  

  • Monitor and adjust your strategy 

Copy Trading may seem more passive than conventional trading, but it still requires regular monitoring and adjustments of your portfolio. Keep an eye on the performance of the traders you are copying from and be prepared to make adjustments if necessary. Stay informed about the market conditions, as they can significantly impact your copied trades. If a trader’s performance begins to decline or when their trading strategy no longer aligns with your trading goals, you should not hesitate to stop following them and seek out a more suitable trader. 

  • Choose the right platform and trader 

Your Copy Trading experience is heavily influenced by the platform you choose and the traders you decide to follow. You are encouraged to select a reputable Copy Trading platform with high user-friendliness, tight security measures, and a diverse selection of experienced traders. Besides, you may pay close attention to the platform’s fee structure and user reviews before making your decision to start Copy Trading. After settling on a platform, it is crucial to evaluate the available traders whom you can copy from, based on factors such as trading style, historical performance, and risk tolerance to identify traders that align with your own trading goals. 

What is New with Vantage Copy Trading? 

The Vantage Copy Trading App user interface (UI) has been enhanced and redesigned. Under the Community tab, more comprehensive filters have been added. This will allow Copiers to easily find suitable Signal Providers according to their requirements. 

Copy trading
Image 1: Vantage App Community Page 

Copiers are able to filter the Signal Providers according to: 

  • Time period: This refers to the duration for which the results of trades are being measured. For example, if the time period is one month, it means that the trades made during that month will be evaluated. 

  • Return: This is the percentage of return that a trader can estimate to earn when they make a trade. For instance, if the return is 10%, it means that for every $100 traded, the trader can expect to earn $10. However, it’s important to note that past performance is not indicative of future results. The percentage of return indicated here is merely for references, and should not be taken as absolute certainty. 

  • Risk Band: This is a measure of the volatility of the trader. A higher risk band indicates that the trader takes on greater risk when making trades. This is usually determined by factors such as the trader’s trading strategy and the assets being traded. 

  • Winning Percentage: This is the percentage of trades that the trader wins over a given period. For example, if a trader wins 70% of their trades, it means that out of every 10 trades made, they win 7 and lose 3. The winning percentage can be used to evaluate the trader’s success rate.  

The Signal Providers’ profiles have been improved and redesigned with personalised cards and an enhanced display of basic information. This makes it easier for users to analyse the Signal Providers’ details and determine whether to follow their trades. Additionally, the monthly return and monthly risk band overview provide Copiers with valuable information about the Signal Providers’ trading performance over time, including profitability and risk. 

copy trading broker
Image 2: Vantage App Signal Provider Profile Page 

By browsing the Signal Provider’s profile further, Copiers can also check the number of users who have replicated their trades in the last 7 days and access information about the Signal Provider’s most frequently traded products. This information can assist Copiers in making informed decisions when selecting a Signal Provider to follow. By gaining insight into the popularity and performance of the Signal Provider’s trading strategy, Copiers can determine whether it aligns with their investment goals and risk tolerance. 

copy trading platform
Image 3: Vantage App Signal Provider’s Profile Page 

Ready to take your trading experience to the next level? Discover the benefits of Copy Trading with the Vantage App! Download the app here!  

Why use Copy Trading with Vantage? 

The Copy Trading function on the Vantage App offers several benefits that can help Copiers achieve their trading goals: 

  • Accessibility 

Copy Trading provides an accessible route to trading. Many Copy Trading platforms now offer user-friendly interfaces and educational resources to help beginners get started. By providing an accessible route into trading, Copy Trading enables novice traders to trade alongside experts with more confidence. 

  • Upskill your trading knowledge 

Copy Trading enables Copiers to follow and replicate the trading activity of experienced traders, allowing them to learn from observing successful trading strategies and develop their own skills. By observing the types of trades that successful traders make, the strategies they use, and the market conditions under which they operate, Copiers can gain valuable insights and further expand their trading knowledge. 

  • Time-saving 

Copy Trading can be a time-saving solution. By following the trades of experienced traders, Copiers can benefit from their expertise and knowledge without the need to conduct extensive research and analysis on their own. This is particularly useful for those who do not have the time to monitor the market daily but still desire to trade. 

Choose Copy Trading with Vantage 

Copy Trading can be a valuable tool for beginners looking to learn from experienced traders and potentially mimic their returns. Ready to utilise the Copy Trading function to help with your trades?  

If you’re looking for a Copy Trading platform that offers a user-friendly experience, an easy-to-use system, and a wide range of assets, Vantage is a great choice. With award-winning 24/7 customer service and an intuitive user interface, the Vantage App allows you to trade efficiently and seamlessly. You can even connect your MT4/MT5 account to take your trading adventures on the road. The app provides a comprehensive display of Signal Providers, including their track record and assets invested, all available at your fingertips.

So, download the Vantage App today and start Copy Trading from as low as $50! Find out more about Vantage Copy Trading here.

Reference:

  1. “Is Copy Trading A Viable Way To Invest? – Finance Monthly”. https://www.finance-monthly.com/2023/02/is-copy-trading-a-viable-way-to-invest/. Accessed 10 April 2023.
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