Copy trading in cryptocurrency is a trading style where traders replicate trades from professional or expert traders. This advanced feature allows new or less experienced traders to access the knowledge and skills of professional traders without needing to design their own strategies or conduct market analysis.
Essentially, copy trading bridges the gap between novices and professionals by allowing users to follow and replicate the trades of successful traders. It is an attractive tool in the crypto trading ecosystem, where markets are volatile and prices can move quickly, requiring attention and expertise.
How does copy trading work?
Copy trading operates through specific platforms or crypto exchanges that support this feature. Here is a step-by-step breakdown of how it functions:
- Platform sign-up: Users register on a crypto exchange or a platform that provides a copy trading service.
- Explore traders: Users have access to a list of professional traders, along with their performance metrics, trading history, and risk profile.
- Choosing a trader: Based on their goals, users select a trader to copy, considering factors like ROI, trading preferences, and risk tolerance.
- Investing funds: Users invest a portion of their money in the selected trader.
- Automatic Execution: When the selected trader makes a trade, the same trade is automatically executed in the follower's account, proportional to their allocated amount.
- Track performance: Users can monitor the performance of the copied trades and make adjustments to their strategy, including stopping and switching trades at any time.
Benefits of Copy Trading in Cryptocurrency
- Learn by Example: Beginners can follow and replicate the trades of more experienced traders, seizing the opportunity to make a profit.
- Low effort: No need to analyze the market or manually click buy and sell.
- Saves Time: Trades occur without needing to monitor the markets 24/7.
- Customized: Users can select traders to copy, specify risk levels, allocate funds, and preset risk management settings.
Risks of Copy Trading
- Volatility: Crypto markets are extremely volatile, and even professional traders can lose their entire balance with a single trade.
- Reliance on Traders: Performance depends entirely on the success of the copied trader, which can result in significant losses, if not due to a poor strategy then due to the unpredictable nature of the market.
- Fees & Commissions: Some brokers may charge fees or commissions for copy trading that could reduce overall gains.
Cryptocurrency Exchanges and Platforms Supporting Copy Trading
- Binance (Binance was founded in 2017 by Changpeng Zhao (known as CZ) and has since become the most popular and technologically advanced cryptocurrency exchange in the world.).
- Bybit (Bybit is known among the crypto community as an exchange that often holds promotions and gives out rewards.).
- OKX (OKX is user-focused first and foremost. They relied on maximum convenience and speed of the exchange, and OKX does this very well. In addition, OKX has its own and very convenient decentralized wallet to store tokens securely.).
- MEXC (MEXC is an exchange with the best conditions. Low trading commissions, frequent promotions, no KYC when withdrawing up to 10 BTC per day.).
- Gate.io (Gate.io, established in 2013, is one of the most comprehensive cryptocurrency exchanges in the market today.).
- HTX (Huobi) (HTX is a trusted crypto exchange that has been operating since 2013 and has over 47 million users worldwide.).
- BingX (Founded in 2018, BingX has emerged as a popular cryptocurrency exchange, particularly known for its copy trading features and versatile trading options.).
- CoinEx (The CoinEx cryptocurrency exchange was founded in Hong Kong in 2017. Today, it serves over 10 million users worldwide, which speaks to its reliability and popularity.).
- Bitmart (Founded in 2017, BitMart has grown to become a prominent global cryptocurrency exchange, offering services to more than 9 million users across 180+ countries.).
- XT.com (XT.com was founded in 2018 and operates worldwide, but is especially popular in Asia. XT is not just a cryptocurrency exchange where you can trade cryptocurrencies, but an entire ecosystem for trading, earning, and borrowing cryptocurrency.).
- CoinW (Founded in 2017, CoinW has become a significant player in the global cryptocurrency exchange space, serving over 7 million users across more than 120 countries. ).
- Deepcoin (Deepcoin, a cryptocurrency exchange founded in 2018 and headquartered in Singapore, has become popular among 10 million users worldwide.).
- LBank (LBank has gained popularity worldwide, particularly in Asia and Europe.).
- Toobit (Toobit is a relatively young cryptocurrency exchange, founded in 2022. Since then, more than 3 million users have registered on the platform, which is a good sign for a newcomer to the cryptocurrency market.).
