5 Main Features of Proper Copy Trading Software
The number of traders using the ever-improving copy trading possibilities on the financial markets increases annually. By copying the transactions of experienced traders, beginners have the chance to gain from veterans' knowledge. Proven tactics increase the likelihood of making money.
Clients of modern copy trading platforms have the chance to connect to broker platforms to simplify the trading process, purchase and sell trading signals provided by professionals, as well as subscribe to other traders and constantly grow.
It is worth mentioning that one of the first and most successful initiatives in this field is the automated trading program called Tradency, which was launched in 2005. With the help of the most advanced services, Tradency's popularity soared. Nowadays, numerous brokers offer a wide range of copy trading facilities.
In this article, we will look at what copy trading software is, the five main elements of such software, and how to participate in "copying" trades.
First, let's take a closer look at what copy trading software is all about.
What is Copy Trading?
Copy trading lets users duplicate positions initiated and handled by certain external parties in the financial markets.
Copy trading software connects a share of the copying trader's assets to the investor's account, contrasting to mirror trading, which enables traders to duplicate only particular techniques. Any trading decisions made moving forward by the copied investor, including entering positions, placing Stop Loss and Take Profit orders or closing positions, are also carried out in the copying trader's account in fraction to the copied investor's profile.
Trading signals are predictions that represent what to trade, the price point at which to start a position, and the positioning of take-profit and stop-loss limits.
A trading signal provider might be a single person or a team of traders. Traders that offer trading signals to their followers must manually open the transactions in their trading platforms.
On a copy trading platform, copied traders are essentially signal providers; the main distinction is that their tips are instantly executed on their followers' accounts.
The incentive programs encourage traders to trade publicly rather than privately by letting others watch and duplicate their deals. Typically, the trader who is copying has the option to terminate duplicated trades at any time and handle them on his own. Additionally, clients can end the copy connection permanently, closing all copied transactions at the asking price. Besides that, traders who allow others to copy their trades, also known as leaders or signal providers, are frequently paid fixed subscription fees by investors known as signal followers. Prominent traders may sometimes even receive a 100% spread reimbursement on their private trades.
Also, a new kind of investment portfolio known as "People-Based Portfolios" or "Signal Portfolios" has emerged due to copy trading. A people-based portfolio differs from a conventional investment portfolio in that funds are invested in other investors instead of market-based assets.
5 Features of Proper Copy Trading Software
In this chapter, we will dive deeper into what type of attributes and vital features every solid copy trading software should have. Based on that, you will better understand which solutions to pick.
Ease of Use
Although a user-friendly design is a matter of personal preference and routine, there are several features that all brokers agree are vital to their profession. Typically, the leading financial services interface and customer relationship management, also known as CRM, have often acted as different entities with minimal or no connection. But, it is necessary to maintain two other systems simultaneously because, with separate accounts and trading histories, traders and investors are supposed to sign in to two platforms, which may not always be comfortable.
Modern and proper businesses that are utilizing copy trading software naturally prefer to have everything in one spot; therefore, for simplicity, many of them create their own solutions. However, creating custom software is highly costly and time-consuming. Due to that, numerous prominent copy trading providers started to offer the service as a single system from the start to meet market demand, be ahead of the competition, and find new customers who would enjoy working with them.
One of the most popular features for clients is the reliability of the system since every single customer wants their software to run smoothly without failing. Hardly anything annoys broker customers more than having to physically fix or copy lost or damaged orders due to a decline of access to MetaTrader. This usually occurs when the copying plugin is remotely linked to MetaTrader. Worth noticing is that the majority of copying services operate just like this.
Also, it would help if you did more research about the provider's reliability.
Note that the gap between the anticipated cost and the performed price is referred to as slippage. An execution slippage is set off if you ultimately pay a higher price. This is typically not a concern in FX, particularly during regular trading hours. Since the Forex market has the most significant level of liquidity worldwide, there is no need to worry that there will be low liquidity and or volume orders. Trading minor pairs, however, could lead to slippage. For instance, trading the so-called exotic pairs won't have the same volume as trading majors.
Choose a copy trading platform and broker that works with multiple liquidity providers to eliminate or mitigate slippage and ensure that trades are performed smoothly regardless of the market circumstances.
Customer support and communication
Both the Forex broker and the system provider must assist all their customers. When you have successfully made your first deposit, make sure that the copy trading platform cares about you, no matter your account size.
Signal providers have a greater chance of maintaining their trades and followers if they contact copy traders regularly and give them information on the state of the market and their trading tactics.
Always do proper research before following a signal provider. It would be a great idea to talk to their customers to learn firsthand details about their interactions with a trader who was in need.
Security and protection of capital
In order to make each transaction as effective and safe as possible, you should be confident in the traders' expertise and the methods as well as techniques they employ. No matter what, it is always a good idea to consider a strategy's safety before joining the financial market, regardless of the approach.
Remember that picking a professional trader and simply copying them in each trade is not the only aspect of copy trading. It also involves risk-management techniques that many beginners simply ignore. The main advantage of this is that you may test different strategies without using your own money. You will stick to tried-and-true methods that have already produced results.
Additionally, pro traders are knowledgeable on how to employ particular risk-management tools to prevent themselves and you from suffering significant losses. Naturally, no one will ever promise a 100 percent return. However, it is better to follow someone with a lot of experience than to figure everything out from scratch.
Please, follow the advice described below to make copy trading even safer:
1. Research the market very carefully before entering.
2. Always choose reputable and trustworthy brokers. They must have a robust security system. Also, your personal information and trading data must be safe and secure, including encryption features or additional security measures, such as two-factor authentication (2FA).
3. Use only trading platforms that are tried and true, like MetaTrader 4/5.
4. Find a professional that trades cautiously. Take into account his ranking, performance statistics, and history of successfully executed orders.
Many platforms offer you to manage MT4/5 accounts. No specialized software, complex setups, or VPS servers are necessary.
Moreover, all accounts will be appropriately maintained on the server around-the-clock by just uploading your login information to the platform. Once you've added accounts, you can use the website in various ways.
Trade copying is the primary function of every copy trading software. The speed provided by every solution has unique parameters.
Once your accounts are connected to the platform, you can set trade copiers. To cover all potential losses, trade copiers provide various risk groups and criteria.
Through a signal webpage, you can use trading tools that are provided by leading traders' accounts as a signal to followers. Every solid software includes all the features traders need for successful copy trading, such as real-time data feeds, stop losses, and trailing stops.
You are never in competition with other signals on the platform because signal pages are publicly available URLs with a unique identifier. They can be used to display your trading performance merely, or you can specify conditions under which customers can follow traders' signals for a specific fee or for free.
How to Copy Trade?
Everyone can start copy trading by simply creating an account with copy trading software and following instructions. Below are a few hints to help you get going as soon as possible.
Create an account: The first phase in copy trading is to create a real account (or demo) with a provider of copy trading services. Nowadays, the procedure is very simple to understand. Once your account has been accepted, complete the registration process, make your initial investment, and start following traders who are doing well.
Pick a pro: Having a trading account running, select an expert you wish to follow. Some time ago, it used to be a time-consuming component of copy trading. However, most modern platforms let you quickly sort through key trading parameters and choose the top traders from their database. When seeking a trader, look at their past performance. Moreover, consider other aspects, such as the markets where they trade, their average on wins and losses, their winning rate, and other factors.
Follow orders: Copying a trader's transactions is as easy as clicking the "follow" button once you've discovered one you consider effective. Modern software and platforms will definitely have some instructions where you can do what they recommend.
It is also essential to know which markets the trader you follow trades on and whether they suit your aims and trading technique.
For instance, traders who primarily trade tech equities may be exposed to issues related to the technology sector. Due to the large price spikes of cryptocurrencies, traders who use them may experience greater volatility in their trading performance. Select a trader who trades the markets of your favor.
Risks: What level of risk tolerance do you have for copy trading? Numerous platforms for copy trading enable you to establish a maximum loss or designate a particular portion of your trading account to one trader.
Market analysis: The benefit of copy trading is not having to conduct your own market analysis. However, this can also be a significant drawback if the trader you are copying is not experienced enough. Always keep an eye on your copy trades and make any necessary revisions if market circumstances change.
Leverage: Would you like to copy trades that use leverage? Leverage can increase both your profits and losses. However, it is highly recommended that you do not risk more money than you can afford to lose.
It is highly recommended to do your market research before you start with copy trading software, especially if you are unfamiliar with the process. If you want to learn more about specific tools by a specific provider, it would be great to read about it directly on their website.
Additionally, platforms always provide technical chart tools, notifications, and in-platform trading advice to let you know how a market is performing.
Copy trading is more favorable for traders focused on short-term trading or with limited ability to stay informed of market dynamics. The copy trading portfolio gave novice and experienced traders a chance to profit by evaluating and selecting traders with a solid track record.
Given the number of brokers who offer their users the copy trading option, it is crucial to evaluate and study each platform to make sure it is suitable for your needs.
For new traders, it is recommended to work with reputable brokers and traders who have experience in all aspects of trading so that they can learn from the best in the industry.