What is Copy Trading?

Copy trading is a simple, automated portfolio management strategy. It involves following a pro investor, tracking their performance and then mirroring their trades in your own trading account.

There are many benefits to copy trading, and it can be a good way to learn the trades of experts. But it is important to be aware of the risks involved.

Benefits

Copy trading can be a great way to diversify your portfolio and gain exposure to markets you may not otherwise have access to. It can also be a useful tool for new investors who aren’t yet experienced enough to trade on their own.

The first step is to open a copy trading account with a reputable platform. Once you’ve done that, you can start following profitable traders.

Most platforms allow you to filter through important metrics such as trading results, profit & loss, average trade size, risk per trade, and more. This can help you choose the best trader to follow and make better decisions about your investments.

eToro

eToro is the leading social trading platform in the world, with millions of traders and investors sharing their knowledge and strategies. It offers low trading fees, great educational materials, a powerful mobile app, technical and fundamental analysis capabilities, and more.

Copy trading on eToro lets you duplicate the moves of experienced traders to save time and learn from their experiences. It also helps you diversify your portfolios into new markets and asset classes.

eToro also features a social news feed that can be useful for traders who want to follow specific cryptocurrencies. It allows you to follow a trader’s updates and watch them in your News Feed, similar to Twitter.

Diversification

In business, diversification is an important strategy to minimize risk. It’s a process of building new products and entering new markets, which can help companies grow and increase their profitability.

In financial terms, diversification reduces portfolio variance, which is a simple measure of financial risk. This can help minimize the effects of market fluctuations, says Shon Anderson, a Dayton, Ohio-based CFP and chief wealth strategist at Anderson Financial Strategies.

A well-diversified portfolio can include stocks, bonds, exchange-traded funds (ETFs), money market accounts and other cash equivalents. Diversification also helps offset significant drops in any one asset category.

Capital Gains

Copy trading is a great way to earn capital gains, which are when the value of an asset increases over time. It also allows you to diversify your portfolio, which is a good idea for any investor.

When you copy a trader, your account will automatically follow their trading actions. For example, if they buy GBP/USD and sell it a few hours later, your account will make the same trade.

Copy trading is a social phenomenon that has gained popularity among investors worldwide. It allows you to automatically follow the trading strategies of more experienced traders and gain their insights. It also helps you remove emotions from the trading process, which can lead to irrational and suboptimal decisions.

Dividends

When companies earn profits, they can reinvest them or pay shareholders a share of their profit (dividends). This type of income is a good way to get regular cash flow without having to sell your stocks.

Dividends also offer the opportunity for capital gains if the company’s stock price increases. They can be a great addition to your investment portfolio and are often preferred by investors who want to keep their holdings in the long term.

eToro offers an innovative feature called Copy Dividends that allows you to enjoy the profits of the traders you are copying while still being able to copy them (as opposed to only enjoying them once you’ve stopped being a copy). When your copied trader withdraws funds, the proportional amount will be removed from their copy allocation and directed back to your account balance.