Copy Trading Deconstructed
Your car broke down. Now what do you do? First you might do some googling and go down the rabbit hole on YouTube, but you quickly realise you have to take your car to a professional, a mechanic in this case. What if we told you that investing is the same way and that there is software that lets you see what experienced traders are doing, and then copy their Strategies?
Copy trading is one of those things that seems too good to be true. It is a win-win situation for both parties involved. You do not have to become super experienced yourself to be successful. If you want to speed up your investment process and mimic one of the best traders out there, then copy trading is for you. Here’s how it works.
What is copy trading?
Do you flinch at market research, technical analysis, financial services, and charts? There is a way to avoid these. First-time investors are notoriously bad at timing the market. With copy trading, newbies or experienced investors do not have to stay on top of all the ups and downs in the market at all times. It is an easy way for beginners to gain the confidence they need to start trading.
Nowadays, using platforms such as ICONOMI, you can copy Strategists with valuable trading experience, mirror their trades in your own portfolio, and get insights into their decision-making. It allows you to rely on the know-how of a seasoned trader rather than on technical analysis.
These are the top 5 benefits of copy trading:
- Gives you time to familiarise yourself with the financial markets by observing the actions of seasoned traders without having to take on the responsibility of making investment decisions yourself.
- Allows you to take part in the market as an experienced trader, even when you don’t have time for it and are not able to put in a great deal of effort into research.
- Creates a community of traders, beginners and experienced alike, who can share insights and Strategies as well as strive to improve their deals together.
- Enables diversification across markets. Many traders have favourite trading instruments, either because they are most comfortable with them or because their Strategy works best with them.
- Provides a potential source of income.
How does copy trading work?
Copy trading works in much the same way as other forms of trading, except that you don’t actually buy and sell assets for your trading account and it is automated. You simply pick a trader with a proven track record and then automatically copy their trades. This makes it easy for ordinary investors to profit from the markets without spending hours on research. If the trader you have chosen changes their trading Strategy, or no longer brings you profit, you can always change it, as well as copy the trades of several traders, which often helps to minimise risks.
For example, let's say you invest $1000 in a Bitcoin ETF. If your chosen trader buys 100 units of this ETF at $250 apiece, then you'll also buy 100 units at $250 apiece. If they sell their units at $300 apiece, then you'll sell too—but only if there are enough buyers on the other side of the trade.
Copy trading is beneficial not only for those who decide to mirror the trades of experienced traders, but also for the chosen traders themselves. For every trade made, they receive a percentage of those who have copied their Strategy.
You can opt to copy a single trader or several traders at once, depending on your preferences and budget. Some copy trading platforms enable users to choose which type of trader they want to follow. For example, you can start copying a high-frequency trader, an experienced trader, or someone with a similar risk profile as yourself.
Is copy trading safe?
Copy trading is safe. It is similar to following an investor on social media, except that you can see their actual investment positions. It is legal as long as the investor is willing to share their portfolio publicly on a regulated platform that has been approved by local regulators.
Copy trading companies are required to implement a wide range of security measures to prevent theft and fraud, including:
- Using encryption technology for secure communication channels between traders and brokers,
- Using two-factor authentication for access to sensitive information,
- Using firewalls to protect against unauthorized access, and
- Perform regular audits on systems and processes to ensure compliance with industry regulations.
Copy trading is a safe way to trade cryptocurrencies or stocks, provided you do your research and pick reputable traders.
Why copy trade with ICONOMI?
If all of the trading options are making your head spin, not to worry—ICONOMI is here to offer a more simple copy trading solution. For beginners and experts alike, ICONOMI offers a viable alternative to more traditional models of investment, bringing crypto investment on par with more mainstream markets. While ICONOMI is taking care of the complexity behind the technology, users can copy existing Crypto Strategies with a minimum amount of €10 or create their own Crypto Strategy within minutes.
ICONOMI, a social trading platform, provides a simple and user-friendly interface, relieving the users of the complexities that deal with multiple exchange accounts, setting up complex orders, transferring cryptocurrencies from one exchange to another, trading, storage, pricing, etc. Our trading engine optimises rebalancing and ensures each trade is executed in the best possible manner, taking into consideration real-time market movements. ICONOMI is also providing a superb user experience with features such as a stop-loss rule. Everything is done on the ICONOMI platform, with you owning only one account.
When we talk about ownership, it is important to emphasise that you own your assets on the ICONOMI platform at all times. If you copy a Crypto Strategy, the Crypto Strategy Strategist does not have access to your assets. With years of experience in the blockchain space and a diverse range of professional backgrounds ranging from finance to development, the ICONOMI team is driven by the shared goal of making cryptocurrency accessible to you. It won't be for everyone, but there are plenty of users who could benefit from its comprehensive approach.
You are now equipped with the knowledge of how copy trading works. You can now make an informed decision as to whether you want to use such platforms for your own investments. As you can see, copy trading can be a great way to meet other traders and connect with them. It is also a good way to learn from more seasoned traders and Copy their Strategies. If you take full advantage of the tools that copy trading platforms have to offer, your experience will be much more rewarding.
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