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Practical Guide to Copy Trading

29.09.2020

Everybody wants to try out copy trading. That’s not a surprise, since it’s a great strategy for trading cryptocurrency. Many traders have plunged into this strategy. But there’s still a bit of confusion about copy trading. People want to know – how safe is copy trading? How can I protect my investment? 

If you also have these questions, you’ve come to the right place. Keep reading to find out tips for safe copy trading!

Staying Safe While Copy Trading – The ABCs

Let’s start with a definition! Trading means buying and selling assets in order to make a profit. With cryptocurrency, you’re trading digital assets for profit. But how does trading become copy trading? That starts when you copy other traders, rather than make your own trades. This way, you can lean on expert experience – even if you’re still a beginner. Want to learn more? Check out our guide on the basics of copy trading today!

How safe is copy trading? 

Because it can involve less stress, copy trading is quite popular. It’s exciting to be able to trade like a market guru. But the question “how safe is copy trading” always pops up. The biggest concerns are usually about making a profit and the risk of loss. 

First, it’s important to know that all trading is risky. It’s great to be successful in trading. But you should also prepare for the possibility of a loss. Traders are human, just like you. And sometimes, things just don’t go as you expect. Copy trading is easier than many trading strategies. But it still requires effort. You cannot simply set your trades and leave them alone. You still need to pay special attention to your account. 

Apart from this, there are certain strategies you can take to copy trade safely. That’s what we’ll discuss in the next section. Stay tuned!

Strategies for Safe Cryptocurrency Copy Trading 

There are possibilities for big gains and also painful loss in copy trading. But there are strategies you can take to minimize loss. The top two are signal provider selection and risk management. Let’s find out more!

Signal provider selection

Copy trading starts with finding a dependable copy trading platform. That’s where you’ll meet superb traders you can copy. These traders are also called signal providers. How you select your signal provider matters. Most platforms will give you the tools to make your decision. Some also include rankings of traders. But how you select is up to you. 

There are many indicators you can utilize. These include profitability, number of followers, return on investment, account drawdown and many more. Learn more about these factors by checking out our article on copy trading signals!

Risk management 

This is pretty key. Risk management refers to strategies you take to minimize the possibility of loss. One of these relates to your copy level. Your copy level is the percentage of your account you set to copy one trader. It is advisable not to set more than 10%-20% of your account on a single trader. Another strategy to adopt is diversification. This means spreading your account across several traders. Copying more than one trader reduces the risk of losing your entire account at once. 

Reliable copy trading platforms also help. Many allow you to set a stop loss. This allows your account automatically stop copying a trader if you lose a specific amount. In addition, platforms may also provide no locked-in funds. CoinMetro crypto exchange gives traders freedom with their funds. Meaning you can reduce, transfer or remove the funds you set to copy at any time. But keep in mind that already set trades will be completed first. 

Hopefully, you’re now well informed of how to stay safe when copy trading. Head on over to CoinMetro to see how copy trading works. If you have any questions, our support team is available to help 24/7!