What Is Copy Trading & How Does It Work? Full Guide for Beginners

Have you ever thought you could also learn everything about the forex market without wasting time on learning with patience and dedication? We are sure at some point in your life, you have wished for the same!

Well, it's a proven fact that trading is a game of patience and dedication, but with Copy Trading, you can grow your money by actively copying the trades of other professionals.

Yes, this type of trading makes everything possible. 

The concept has become extremely popular over the last few years, particularly among newbies who are eager to join the forex market but are intimidated by charts, analysis, and rapidly changing prices. 

In this complete guide, we'll break down what Copy Trading is, how it works, the benefits, and how to get started. So if you're looking for a simple and effective way to invest in the forex market, you're in the right place.

What is Copy Trading?

In simple language, copy trading allows you to follow the actions of profitable traders. If they sell, you sell. If they buy, you buy. And the good news? You remain in complete control of your account while they do all the work.

With copy trading, you can earn as you learn, see how experts take decisions, and build your confidence over time.

Key features of copy trading

This type of trading offers several key features, which are listed as:

1. Learn while you earn: Observe and learn strategies in real time.

2. No experience required: To start copy trading, you do not have to be a pro.

3. Automated trading: Copied trades are executed in real time.

4. Complete control: You can start, stop, or modify trades at your will.

5. Variety of trader choices: Select from a list of expert traders. 

Social Trading vs Copy Trading

Copy trading is about automatically duplicating discretionary trades executed by other single traders on supported platforms. Integrated automated processes duplicate replication using copier-set parameters such as allocation percentages. 

On the other hand, social trading brings traders together via discussion forums, but without computerized copying of trades. Traders post analysis, strategies, and planned trades, which other traders can manually place if they wish. Discussion is centered around cooperation rather than exact copying of trades and orders, which remain subject to individual judgment and implementation.

Key differences of social trading vs copy trading

Features	Social trading	Copy trading
Definition	A platform to observe, discuss and follow traders’ strategies	Automatically copy trades of expert traders in real time
User-interaction	High- users share ideas, comment and interact	Low- mainly focused on copying trades
Control over trades	More control	Less control
Learning opportunity	Great for learning	limited
Automation	Optional	Fully automated
Ideal for	Traders who want to learn, analyze and interact	Beginners or busy users looking for hands-free trading
Decision making	User-influenced, based on insights from others	Trader-influenced you rely on the expert decisions

How does copy trading work?

Copy trading for beginners is similar to having a pro sit by your side and direct your trades in real time. Rather than deciding on your own, you copy the actions of an experienced trader, mirroring their buys and sells automatically.

Here's how it goes:

1. Select a Lead Trader – Various platforms offer you a list of professional traders, including information on their performance, risk, and trading history. It is your responsibility to research and decide individually which lead trader you want to copy.

2. Set Your Allocation – Choose the amount of capital you wish to use to replicate their trades. There are flexible allocation options for some traders, meaning you can allocate across several strategies.

3. Automatic Execution – After you've chosen a Lead Trader, their trades will be automatically executed in your account without requiring any manual intervention.

4. Monitor and Modify –Although copy trading does the work for you, you retain control of your investments. You can modify your allocations, halt copying a trader, or adjust risk settings whenever you like.

Thus, copy trading enables you to select strategies suitable for your risk tolerance. Although it's a shortcut to advanced trading, it’s not entirely risk-free. 

Benefits of copy trading for beginners

Copy trading comes with a range of benefits, which makes it an attractive choice for both new and professional traders.

• Passive income potential: With copy trading, you don't need to spend all day sitting in front of charts. You choose a professional trader to replicate, and their trades are mirrored in your account instantly — opening the doorway to passive earnings.

• Beginner-friendly: You don't require in-depth knowledge of forex or technical analysis. Copy trading allows you to learn from professional traders while your account remains active in the market.

• Diversification: You can diversify your capital among various traders or strategies. This serves to minimize risk and expose you to a variety of trading styles.

• Time-saving strategy: Busy schedule? Not a problem. Copy trading entails little monitoring, so it's ideal for individuals who can't trade full-time.

• Transparency: Most platforms give you access to in-depth performance statistics, win percentages, and risk levels of traders — so you can make informed decisions.

Best copy trading tips for beginners

Just because copy trading sounds easy doesn’t mean you can jump in it while being blindfolded. Here are some tips that we want every trader to follow when they are going to start their forex trading journey:

• Research Before Copying: Don't select traders on the basis of flashy numbers only. Look for consistency, low risk, and a good record over a period of time.

• Diversify Your Portfolio: Rather than copying a single trader with all your money, think about dividing your money over 2–3 good traders

• Set Realistic Expectations: Copy trading for beginners is not a fast route to riches. Be patient and go for steady growth and not big profits.

Final Thoughts

Copy trading offers great opportunities, especially for individuals who are new to forex or lack the time to trade on their own. It's a great means of learning the ropes, earning passive income, and gaining exposure to the financial markets without needing to make all of the decisions yourself.

But as with any form of investment, making the right decision and risk management are key to successful copy trading. The idea is to thoroughly research, stay active, and build your trading experience over time.

If you are ready to get started, select a reputable platform now and begin your trading journey.

FAQs on Copy Trading

• Is copy trading safe?

Copy trading is considered a safe option when you are new to trading. But you must also know that by only copying the real and experienced traders, you can make profits.

• Can you make money with copy trading?

Yes, many traders often earn good ROI by copying professional traders. However, the amount of money you can earn depends on the trader you are copying and the market conditions.

• What are the risks of copy trading?

The main risk you can incur in this type of trading is copying a trader who doesn't know how to trade. If they are underperforming or do not have the right strategy when the market is volatile, then this can be a problem.