Five Reasons for Copy Trading: Unlocking Your Financial Potential

30 May 2023

With the social trading sector expected to grow and reach a market size of $3.77 billion by 2028, copy trading, a form of social trading, is fast becoming a popular way for traders to achieve their financial and trading goals. Copy trading allows traders to mirror or replicate the trading positions of another selected trader on the platform. As a copier, the amount of time needed to research and analyse the market is significantly reduced as your positions are automatically mirrored to the trader of your choice.  

Essentially, copy trading works by selecting another trader whose trades you wish to follow on the platform. After selecting the trader, the positions opened or closed by the trader will subsequently be replicated in the copier’s account. As a result, you will also reproduce similar trading returns as your chosen trader.  

The practice of copy trading is popular for many reasons. Continue reading to learn more about the benefits of copy trading! 

Reason to use Copy Trading 

Reason 1: Better Risk Management 

As with all forms of trading, copy trading also comes with risks. However, copy trading can help with managing risk more effectively. By following traders who have a history of managing risks well, you can benefit from their expertise and potentially minimise losses.  For example, in the Vantage app, you can choose traders to copy based on their risk band. The higher the risk band, the more volatile the trader tends to be.  

As a beginner looking to copy a trader with good risk management, you can choose to filter for traders based on the popular filter combinations on the app such as “Low Risk and Stable Return”.  

You can also choose traders with lower daily maximum drawdowns. A low daily maximum drawdown indicates that a trader is able to limit their losses on any given trading day. 

Reason 2: Diversification of Portfolio 

Diversification of your portfolio is important as it may help to reduce the impact of market fluctuations on your portfolio. However, diversifying your portfolio can take time, especially if you lack market knowledge and expertise. Through copy trading, you can follow multiple traders and their respective strategies. This can reduce the impact of market fluctuations on your portfolio, as well as help you to mitigate risks. Just think of the saying, don’t put all your eggs in one basket!  

Reason 3: Saves Time 

As copy trading fully automates your trading decisions, you can follow the trades of traders with proven track records and let them do the work for you instead of spending hours analyzing the market and keeping up with the latest market news.  

Reason 4: Learn from the Best 

Every trader has different approaches when it comes to trading and analysing the market. Through copy trading, there is the potential for learning about trading and understanding the market through real-life case studies of the traders you follow. When following experienced traders with proven track records, you can pick up on their strategies and methods of trading. The same goes for traders with significant losses. It is equally important to know why some trades do not bring expected returns and why some trades do.  

If you are a beginner trader, you can gain valuable insights into how the market works, and what works best in different market conditions. Through copy trading, you can earn and learn as you go along. 

Reason 5: May Assist Both Beginners and Experts 

Copy trading isn’t just for beginners, it can be use by both beginners and experienced traders alike.  Through copy trading, beginner traders can not only gain confidence but also have the opportunity to learn from successful traders with years of expertise and knowledge. For experienced traders, it provides them opportunities to gain insights from other traders with different trading approaches which they might have missed out on – opening the doors to alternative trading opportunities.  

Downsides of Copy Trading 

While there are many advantages to copy trading, it is also important to note the risks associated with it. 

It is important for you to strike a balance between relying on copy trading and also conducting your own research and market analysis to strengthen your expertise and develop your own trading skills and strategies. 

Tips for Maximizing the Opportunities of Copy Trading 

As mentioned above, there are unavoidable risks that come with copy trading. But fret not, here are some tips for you to maximize the benefits of copy trading. 

Tip #1 Check All metrics Before Choosing a Trader to Copy 

Don’t simply look at one success metric. There are multiple factors for you to filter for when selecting a trader to copy.  

Do pay attention to metrics such as: 

Other factors to take note of, even if they don’t directly indicate the expertise of the trader, include:  

While it is possible to follow the crowd and follow a trader who has more copiers, it is important for you to do your due diligence and conduct sufficient research on traders before choosing a trader to copy.  

Tip #2 Consider Choosing Multiple Traders to Copy 

While it may be tempting to choose one trader with high returns to copy, investing in multiple traders can help to diversify your portfolio further and spread risk.  The markets can be very volatile where even the most experienced traders could fall victim to unexpected market movements. Choosing multiple traders can ensure that your investments are put into different asset classes with varying degrees of risk. Remember: do not put all your eggs in one basket! 

Tip #3 Put Stop Losses in Place 

Consider assigning stop losses to your trades as this will help you close out a trade when it reaches a certain price level, limiting your potential losses during unfavourable market conditions.  Stop losses will also offer you peace of mind as you can focus on other aspects of your life knowing that your investments will not fall below the price point you are comfortable with. This protects your trades from market volatility and incurring losses that you are unable to stomach.  

Start Copy Trading with Vantage 

Whether you are a trader who is just starting out or a seasoned trader looking to potentially increase your returns, copy trading is a great way for you to achieve your financial goals. Download the Vantage Trading app here and begin your copy trading journey with a user-friendly experience and an easy-to-use system. 




Is it Easy to Learn Forex? A Comprehensive Guide to Mastering Forex Trading

Is it Easy to Learn Forex? A Comprehensive Guide to Mastering Forex TradingForex trading is a captivating endeavor, promising both active and passive income streams. Yet, mastering forex is a continuous journey that transcends expertise levels, be it a novice or a seasoned trader...

26 Jan 2024

NordFX: Earning the Title of Best News & Analysis Provider for 2023

NordFX: Earning the Title of Best News & Analysis Provider for 2023In a resounding victory, NordFX, a prominent brokerage firm, has been crowned the "Best News & Analysis Provider" of 2023...

22 Jan 2024

Unlock Global Trading Opportunities with Errante

Unlock Global Trading Opportunities with ErranteErrante, the premier online broker, is dedicated to delivering top-tier services and forging long-lasting, trust-based relationships with our clients. Our mission is to enhance your online trading journey...

18 Jan 2024

Three Popular Gold Trading Strategies When Trading Gold CFDs

Three Popular Gold Trading Strategies When Trading Gold CFDsGold, a precious metal revered for its value for centuries, has found its place in the world of trading. Trading gold has become a popular way to invest in the commodity market...

16 Jan 2024

Mega Super Lottery 2023 New Year's Draw: Another $50,000 Drawn

Mega Super Lottery 2023 New Year's Draw: Another $50,000 DrawnSince 2021, NordFX, a renowned broker in the financial markets, has been captivating its clients with the annual Super Lottery, boasting a staggering prize pool of $100,000...

11 Jan 2024

Exploring the Advanced Features of FXTM's MetaTrader 5 Platform

Exploring the Advanced Features of FXTM's MetaTrader 5 PlatformIn the dynamic world of online trading, staying ahead with cutting-edge technology is crucial. FXTM’s MetaTrader 5 (MT5) platform, the brainchild of MetaQuotes Software...

9 Jan 2024

Suggested Forex Nominations

All Nominations 2024