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Best Copy Trading Signals – How to Choose

29.09.2020

Copy trading is a great way to start trading cryptocurrency. But in order to start, it’s important to learn about copy trading signals. What exactly are these trading signals? How do they affect copy trading success? And how do you pick the best signal providers? 

Today, we’re focusing on everything to know about copy trading signals. Stay tuned!

Copy Trading Signals – The Basics

If you are new to the world of trading, no worries! Here’s a little primer on trading and cryptocurrencies. Trading means buying and selling assets to make a profit. Cryptocurrencies are digital assets that you can also trade for profit. Usually, people trade with their own knowledge and skills. But copy trading allows you make the same trades as expert traders. You pick a trader to follow and when they make a trade, you make the same trade automatically. Exciting, isn’t it?

We’ve prepared a guide that explains all about copy trading. Check it out! In case you’re wondering – how safe is copy trading? You can also read our guide to safe copy trading

What are Copy Trading Signals? 

A copy trading signal is a strategy shared by an expert trader. You can think of it as an alert. It tells you of a trading opportunity. The term initially became popular on social trading platforms. There, a skilled trader will send “hot tips” for a trade. Then other traders can copy these tips to their account. But with copy trading platforms, you can simply subscribe to a trader’s signals, for a fee. This means when they share a signal, your account copies it automatically. So, you can make the same trades as they do, without lifting a finger. 

One of the biggest concerns for copy traders is picking the right signals to follow. That’s what we’ll talk about next. 

How to Pick the Best Copy Trading Signal Providers?

The best copy trading platforms give you tools to pick successful traders. These usually include analysis of a trader’s profile and signals they provide. But there can be a lot of information to wade through. Don’t feel overwhelmed though. Here are the top three factors to keep in mind. 

Track record 

A signal provider’s track record is important. It tells you how they have fared over a period of time, usually 12 months. Over this period, you can see a lot of information. This includes return on investment, number of trades, number of followers and account drawdown. Drawdown is the number of times their account has been negative. You can also learn from a trader’s win percentage. This tells you how much of their trades end up successful. A good number to aim for is 75% to 85%. 

When considering these factors, you should be careful. Some traders have flashy numbers. But these may only be short-lived. Go for traders that have a consistent, lengthy and dependable track record. 

Strategy fit 

Strategy fit means how well the trader’s tactics fit with you. For instance, if you prefer day trading, a trader that holds long term will not fit you. Another thing to pay attention to is their trading pairs. Trading pairs refer to the trade combinations you pick. For example, EUR/BTC trades the euro against bitcoin. If the trader’s signals require more trading pairs than your account allows, then that won’t be a good fit. 

It’s important to research the trader’s strategies thoroughly. This way, you can be confident they will take positions that favor you. 

Risk profile

Finally, you should consider traders based on your risk appetite. Risk simply means the likelihood that a trade will fail and cost you money. Often, trades that have the most risk also have the most reward. But too much risk may be bad for your account. Make sure the trader’s risk appetite matches yours. One of the indicators of high risk is whether the trader sets stop levels to open trades. Another indicator is their historical drawdown. 

With these tips, you’re now well informed on how to pick great signal providers. Want to get started on a first-rate copy trading platform? Try out CoinMetro crypto exchange today!