What is Copy Trading and What Are Its Benefits?

Copy trading

As with any profession, to become a successful trader, you need education, experience, and the most up-to-date information. You probably lack all these characteristics if you are just beginning to trade. You may have heard of copy trading, but what exactly is it, and what are the benefits for a novice? Read on to find out.


How does copy trading work?


A copy trading platform is similar to social media platforms, like Facebook, Instagram, or Twitter, where professional, experienced traders can share information with beginners. Typically, brokers provide a copy trading platform with two main categories, social networks, and social brokers.

With social network trading, you use social media sites like Twitter, where you gain access to forums and discussions where traders share knowledge and ideas. On the other hand, copy or social Brokers provide dedicated platforms where you can auto-copy trading strategies. For example, if you want to get started with CFD trading, with a trading platform, you can auto-copy what the top traders trade on, with options to source the most followed, best live, most copied, and most profitable trades.

CFD trading, or Contract for Difference trading, is easy to start as it is pretty straightforward, and you will quickly pick up your own strategy. With CFD trading, you speculate on the value of an asset and trade on margins without the risk of owning an asset outright. Traders can buy and sell CFDs in stocks, cryptocurrencies, fiat currencies, metals, equities, etc.


people using social media
Image from Pixabay

In addition, copy-trading makes the financial market far more accessible and user-friendly. You are essentially copying another person’s trade. Of course, there is risk involved, as with any trade, since you still risk losing your investment. On the other hand, experienced traders share information based on a deeper understanding and analysis of the markets.


What are the benefits of copy trading?


Novice traders profit the most from copy trading platforms. It allows them to benefit from the knowledge of far more experienced traders while studying their strategies. Think of it as being tutored by skilled traders. You will have the opportunity to interact with them on a one-to-one basis. Simply auto-copy the top traders and receive the same results they do.

If you are approaching trading as a sort of side hustle or passive income source, copy trading can be beneficial as it will help you pick up strategies and insights into trading quickly. While you learn and develop your own trading strategy, you also have the potential of earning a little money at the same time.


hands holding money and lightbulb
Image from Pixabay

There is a lot of misleading and inaccurate information out there about trading. You may easily find yourself in hot water if you follow the wrong advice. With copy trading, you can be confident you are being provided reliable and accurate information from genuine professionals.

If you are a professional or experienced trader, you will have the opportunity to earn a commission from your expertise. When other traders auto-copy your trading strategy, you grow a following. As you rise up the leaderboard, your potential for earnings increases.