To become a successful crypto trader, you must know how to conduct technical and fundamental analysis properly. But learning such a skill is a massive struggle for many new traders. Does that mean they should give up and try something else? No! The trading world has evolved, making it possible for novice traders to earn profits with little knowledge.
If you stick with me to the end of this article, you will learn how to make profits by copying the strategies of experienced traders. Please keep reading.
What’s Crypto Copy Trading?
Simply put, crypto copy trading is an advanced strategy that allows anyone to copy the trading methods of experienced traders. It enables newbies to make profits without spending too much time carrying out market analysis. All you have to do is identify a skilled trader and re-execute their moves. So, for example, when the trader spends $50 to buy a crypto asset, you can also commit the same amount to purchase that coin simultaneously.
Many mistake crypto copy trading with crypto social trading. The latter involves joining a group of traders on social media platforms, where experienced traders suggest what cryptocurrencies to purchase or sell. The downside of this strategy is that you cannot tell whether the traders who give trading advice implemented it on their side. There are chances they may be misleading.
How Does Cryptocurrency Copy Trading Work?
Here is how you can start copy trading:
Select a Trading Platform
Several crypto exchanges now support copy trading. Some of them include BingX and Bybit. Always check whether the platform allows people from your country to use their services before starting the signup process.
Pick the Ideal Trader
After signing up, the next step is to find a proficient trader. Some of the factors you can use to select the trader include their win probability, profits generated for the last thirty days, and number of copy traders, among others. But how do you access such information? Well, most exchanges require traders to give users access to their profiles. By visiting a trader’s profile, you will also be able to see what users say about the trader.
It is important to note that copying a trader’s strategy is not free. They usually charge around 5%-10% of the profit generated.
Set up the Software
Copy trading is automated. Therefore, you are required to set the amount you’re willing to risk, stop loss and take profit. After inputting this information, you will enter the market automatically when the trader opens positions. Note that you can follow the strategies of as many traders as you wish to spread the risk. But to do this, you must have a large investment fund.
Monitor Trades
Nothing is 100% sure in crypto trading. So it is advisable to keep an eye on the trades to check whether they’re going as per the trader’s expectations. In case you are convinced that a particular trade will cause losses, you can always stop the software and exit the market.
Is Copying Crypto Trades Legal?
Many regulators, including Financial Conduct Authority and European Securities and Markets, recognize copy trading. But to legally engage in copy trading, ensure you sign up with a regulated trading platform.
Risks of Crypto Copy Trading
Considering the high volatility of the crypto market, anyone copy trading should be aware that there is a chance they could lose their investment fund. Therefore, always invest what you are willing to lose.
Also, keep in mind that all software, regardless of how well they have been developed, might misbehave at any time, delivering unexpected results. So as mentioned earlier, monitoring the trades is key.
Long-Term View of Crypto Copy Trading
If you’re able to sign up with a reliable trading platform and pick a proficient trader, copy trading might become a long-term trading strategy for you. And since you can see the actions of the seasoned trader, then with time, you will learn how to analyze the market by yourself.
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