Forex trading experienced a massive explosion in its popularity over the last few years. There were many reasons involved in this process such as easy accessibility, high liquidity, technological advancements, and flexible working hours, which attracted the attention of investors, banks, financial institutions, and retail traders from all around the globe. However, it seemed harder for new traders to be as successful as others in the forex market because developing an understanding and skill in forex trading was still a hurdle they had to overcome. Fortunately, with the growth in the forex trader community, a copy trading strategy was introduced which solved this problem as well.
Copy-trading as the name suggests is a trading strategy that allows traders to copy the trades of other more experienced and professional traders. It is said that copy trading branched out from mirror trading. Initially, around 2005, traders used to copy the strategies and algorithms which other traders developed for automated trading and shared their history. Copy trading is sometimes even referred to as mirror trading or social trading which is another strategy where traders share ideas, strategies and tools they use leading to other traders who either replicate those or study them to develop their own strategies.
On the other hand, copy trading is slightly different from these two, as it allows the traders to copy positions, entry, exit and stop loss from experts without learning the strategies behind it, simply copying the trade blindly. It can either be done manually where a trader just receives Forex signals from other traders regarding their trade and making a decision themselves to copy the ones which suit them best or they can use a fully automated copy trading software that copies the trade for the traders without having to do anything.
One of the major aspects due to which Copy Trading got so popular is that it’s easily accessible for everyone. Many forex brokers now offer social trading networks on their platforms along with other trading services which make trading really easy for many new traders. The only hard work traders must do here is to look for a reliable forex broker as well as the trader which they are going to follow. This brings light to another advantage of Copy Trading that it allows diversification of your portfolio management. By using the Copy Trading strategy investors can spread their capital in multiple other assets, lowering the risk as they get back up in case some trade fails.
Another huge feasibility that copy trading provides is that traders can save their time while trading as someone else monitors the trading process, they use their time whichever way they like either by upgrading their knowledge about trading or spending it on their hobbies.
This strategy offers room for further growth in forex trading along with better chances of making profits if the trader which you are going to copy is chosen wisely with thorough research and helps in putting a limit to your losses. There are many top forex brokers which have social trading platforms or offer copy trading software and even promote it as a useful tool in the forex trading community.