Guide to Selecting the Best Trader to Copy

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Imitation is believed to be the highest form of flattery,

but it may also be incredibly profitable. If you want to trade like the greatest, you should try to emulate the top traders while also tailoring your strategy to your specific needs and circumstances. Visit multibank group 

Copy trading, as the name implies, includes a community of traders rather than a single trader, and it is precisely this social experience that has piqued the interest of corporations from a variety of industries, who are now catering to our more communal tendencies. 

It is, in fact, a subset of a wider phenomenon known as social trading, in which a retail investor can manage wealth by directly following the financial advice of other traders.  

The approach often entails traders making friends, posting thoughts, and communicating with other investors via specific social media platforms, all of which can subsequently be used to make trading decisions. A recent shocking example involves newcomers swapping investment ideas on TikTok. 

These firms focus on a specialized category (e.g., fitness, finance, food, etc.) and incorporate an authentic and unique community around a product within that category. They are often referred to as "social+" companies. Trality's Marketplace is an excellent example, where bot makers and bot followers may meet and interact for mutual benefit. 

 

What is copy trading? 

So, what exactly is copy trading? At first appearance, it appears simple: mimicking the trading of someone or something else. But there's more to it than that. The more you learn about it, the more you'll see how similar it sounds to methods like social trading and mirror trading. Indeed, it can be difficult for novice traders to distinguish between copy trading, social trading, and mirror trading, which is why we must clarify our terms. 

Simply put, copy trading is the practice of replicating deals made by a single trader. Mirror trading, on the other hand, occurs when a trader employs algorithms to find the optimal general strategy based on the behaviors of a group of traders.  

Moving from the specialized to the general, social trading entails observing the trading activity of other traders (professional or not) and copying or mirroring their techniques. 

If this seems like a variation on a theme, you're not far off. Let us consider how these practices evolved, which should help to clarify things. 

 

How copy trading works 

Copy trading has become so widespread that it has given rise to the term "people-based" portfolio, which refers to traders who invest in other traders or investors rather than performing trades themselves. 

The main idea is to replicate all the deals made by a specific trader. When they win, you gain. When they lose, you lose. However, the technique for copying deals is not as simple. Because you only connect a portion of your portfolio to a single trader, trades are done on a percentage basis. 

In some ways, this lets you diversify and avoid putting all your money into a single supply chain. It is strongly recommended that you do not invest more than 20% of your money in a single trader. 
 

How to choose the best forex trader to copy 

One of the most difficult aspects of copy trading is deciding who to copy. There are numerous signal/strategy suppliers on one platform, as well as numerous aspects to consider. 

So, we reduced the criteria to only six. It's still a lot, but it's enough to get you started. The first thing you should do is read a trader's profile description. This is where you'll find all the relevant information, you'll need to find the greatest trader to mimic. 

 

Proven track record 

Examine a trader's performance over the last year or more. It is preferable if they have been trading for a longer period of time so that you can observe their performance when the market is bullish or negative. 

 

Returns 

The ideal trader to follow must produce consistent outcomes rather than irregular ones. Looking at the historical performance graph is an easy way to identify this. If it is progressively increasing, you may want to consider your future signal provider. Check out someone else if there are any abnormal spikes. 

Essentially, you'd want to emulate a trader who generates 3% returns each month for a complete year rather than one who wins the first six months and loses the next six. 

 

Confidence 

Follow a signal provider who trades with real money on a real account. If this is true, they will be less risky in their trades. This also shows that they are confident enough to incur risks in exchange for the rewards of Forex trading. Check to see if the negative month in their performance chart is intentional or a mistake. 
 

Level of Risk 

Copy trading is not without risk, but you don't have to put your money at risk if you can't afford it. This is where you should consider the danger level of a signal provider. Is it too high or too low? 

Check to see if stop levels are established on each trade opened and at what distance to evaluate risk levels. Don't imitate a trader who has no stop levels because this equals unlimited risk. 

 

Historical drawdown 

Drawdown in Forex is the gap between the account and equity balances when the equity balance is less than the account balance. It measures the greatest loss of an account, which is why you should look at how much of a trader's account has been in the red over time. A similar drawdown is likely to occur again in the future, especially if the same technique is utilized. 

 

Number of followers 

A trader with a large number of followers, similar to social media, may signal that they are suitable for copying. They're even comparable to influencers. Why would anyone duplicate their trades if they weren't winning? You could also receive a percentage of the prizes. Know more تداول الفوركس 

However, you must determine whether the followers, or a majority of them, trade with "real money." After all, you're putting your own money on the line. 

This also provides you with an advantage in social trading. You can solicit trading tips from others who follow you, as well as their opinions and trading techniques. 

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