Copy trading in cryptocurrency is a trading style where traders replicate trades from professional or expert traders. This innovative feature allows new or less experienced traders to leverage the knowledge and skills of professional traders without having to develop their own strategies or conduct market analyses.
Essentially, copy trading connects novices and professionals by allowing users to follow and imitate the trades of successful traders. It is an attractive tool in the crypto trading ecosystem, where markets are volatile, and prices can change rapidly, requiring attention and expertise.
How does copy trading work?
Copy trading operates through specific platforms or crypto exchanges that offer this feature. Here's a step-by-step breakdown of how it works:
- Platform sign-up: Users register on a crypto exchange or platform that offers copy trading services.
- Explore traders: Users gain access to a list of professional traders, along with their performance metrics, trading history, and risk levels.
- Users choose a trader: Based on their goals, users select a trader to copy, mainly considering ROI, trading preferences, and risk tolerance.
- Investing of money: Users allocate a portion of their funds to be invested with the selected trader.
- Automatic Execution: When the selected trader executes 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 adjust their strategy, including stopping or swapping trades at any time.
Benefits of Copy Trading in Cryptocurrency
- Learn by Example: Beginners can follow and replicate the trades of more experienced traders, taking advantage of the opportunity to profit.
- Low effort: No need to analyze the market or click buy and sell.
- Saves Time: Trades occur without the need to monitor the markets 24/7.
- Customized: Users can select traders to copy, manage risk, specify funds allocated to each, and set risk management settings.
Risks of Copy Trading
- Volatility: Crypto markets are extremely volatile, and anyone (including professional traders) can lose their entire balance with a single trade.
- Reliance on Traders: Performance depends entirely on the success of the copied trader. The outcome can be significant loss, whether due to a poor strategy or the unpredictable nature of the market.
- Fees & Commissions: Some brokers may charge fees or commissions for copy trading that could reduce overall gains.
Crypto Exchanges and Platforms Supporting Copy Trading
- 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.).
- 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.).
