By Ikenna Pius
Brokers make it look like copy trading is a risk free way to make money. That is a lie that only benefits them; they profit when traders and investors lose. Making money from copy trading is possible but quite a tricky business because if one does not choose a good copy trader, then one loses all his investments.
Copy trading has many disadvantages; but if one knows how to avoid the traps that come with it, then there is a lot of money to be made through this investment avenue. One can even make more money than one could make from a bank, from stocks, and from real estate.
The following tips can help avoid wrong copy trade accounts; which means good profits for the subscriber.
How To Choose A Good Forex Copy Trader
Profits Should Be Small
In forex trading, the trader makes a stake which he could lose if the trade went against him. That means, the bigger the profit, the bigger the risk. It may look like sunshine and rainbows, but that kind of thing often does not last very long.
Most copy trade platforms calculate profits and losses in percentages. That is a good thing; it helps one calculate how much money he can potentially make by following any individual trader.
It also helps one identify gamblers posing as traders. If a person makes 100% in a month, then it is easy to see that he has made a huge gamble, which paid off. However, he may not be so lucky next time; the next gamble may not pay off.
Should Be Active For A Long Time
Of all the things to look out for before choosing a copy trader this is probably the most important because the goal of investing is to make money for the long term; not just to make money for some time, and then lose it all again.
A trader who has successful traded for a long time will probably continue trading successfully. This is why understanding investors often choose accounts like that. But just being alive for a long time may not be sufficient; this is because clever tricksters can shore up their accounts by making deposits.
Should Be Making Withdrawals Not Deposits
A good copy trader account should be making withdrawals, not deposits. As an investor; the purpose of investing in social trading is to make profits; and to withdraw said profits for use in one’s life, or for other investments.
The chances of making that money are boosted by the fact that the trader who one is about to copy is making profits, and withdrawing them.
A trader may decide not to make regular withdrawals; he may like to keep the account big and green; but in that case he should not be making deposits.
There Should Be Loses Or Draw Downs
When traders open positions they do so based on the conviction that the currency pair will behave in a certain way. It is not exactly a prediction, but it comes quite close. The thing is; no trader can be right all the time.
Loses are a natural part of the business of trading forex. However, traders may have different approaches on how to deal with the losses; they may choose to close them or manage them in the hopes that the asset will behave differently in the future. In the later case; such a position is called a drawdown.
Because no trader is right 100% of the time, his loses should be seen. That way one knows that he is dealing with a real person and not a robot. But why should it not be a robot?
Should Not Be A Robot
Robots are considered an easy way out for many people; these are software that are designed to trade based on a set of rules. For example; when this happens, buy; and when that happens, sell. They can trade when the trader is not on his seat; and they can be quite profitable.
For some time! The forex market is dynamic; it is constantly changing. Therefore, any set of rules (robot) will only work for some time.
A trader who is trading manually can detect these changes and decide to give it a rest, or try something new. However, a robot (or an expert advisor) cannot see that its system is falling. It just keeps doing the same thing again and again until it runs out of money.
The above information can help one avoid the bad copy trade options and choose profitable ones. However, sometimes it is not possible to know if a trader meets the requirements until after one has followed him.
After following a trader; one must look at the following signs to decide whether or not to click the “unfollow” button.
Should Trade Multiple Pairs
A real trader should trade multiple pairs; that is natural because it presents more opportunities, and then the trader would have a longer term outlook on trading. Sometimes he may miss a setup but catch a move on a different pair.
If a trader only trades a single pair or even two; then he is most likely a robot disguising as a human being.
Should Not Martingale
Yes, martingale systems can work under certain circumstances but in a situation where one is not trading it for himself, but copying another person’s trades, it is just not a good idea. For one thing; no matter how well one may guard against a robot, it is still possible that a trader has cleverly disguised a robot as manual trading.
If one has already followed a trader but observes that he opens multiple positions in the same direction while increasing the lots, then one should smell trouble. If one observes sell positions (or buys) that are losing, but the trader keeps on opening bigger sell (or buy) lots, then it is a martingale robot.
Quickly click on the “close all trades” icon, and then unfollow the trader immediately. Yes, the result would be a small loss; but staying on with such a trader could mean losing all of one’s deposits.
Where To Find Good Accounts For Copy Trading:
There are many forex brokers that offer copy trading services. They may also call it social trading. A quick search with your favorite search engine will reveal these brokers, and then one can just go through their leaderboard to select the best or the most suitable accounts. This is the easiest way of going about it; this is what ordinary investors do.
Alternatively one can go to an independent source; one that curates the information independently, and is not affiliated with any trader or broker. This kind of source will then display the most profitable traders from different brokers. This is how seasoned investors go about it; but then a VPS would be required because the account has to be connected 24 hours.
Further Reading:
Closing
Knowing how to choose a good copy trader account for forex can make all the difference; it can turn a very risky affair into a very profitable one. By following the steps highlighted in this post; one can reduce the risks drastically, while increasing the chances of making good money, while learning from the pros at the same time.
