Copy trading in cryptocurrency is a trading style in which traders copy trade from professional or expert traders. This progressive feature ensures that new or less experienced traders can access the wisdom and skills of professional traders without either designing their own strategies or conducting market analysis.
In essence, copy trading bridges the gap between novices and professionals by enabling users to follow and replicate the trades of successful traders. It’s an appealing tool in the crypto trading ecosystem, where markets are volatile and prices can move quickly, demanding attention and expertise.
How does copy trading work?
Copy trading works through specific platforms or crypto exchanges which support this feature. Here is a step-by-step breakdown of how it works:
- Platform sign-up: Users register on a crypto exchange or a platform that provides copy trading service.
- Explore traders: Users have access to a list of professional traders, their performance parameters, trading history and risk.
- Users choose a trader: Based on their goals, users select a trader to copy. These mainly involve ROI, trading preferences and tolerance of risk.
- Investing of money: Users invest a part of their money to invest in the selected trader.
- Automatic execution: When the selected trader places a trade, the same trade is executed automatically in the follower’s account, proportional to their allocated amount.
- Track performance: Users are able to track the performance of the copied trades and can make adjustments to their strategy, including stopping and swapping trades at any point in time.
Advantages of copy trading
- Learn by example: Beginners can follow and replicate the trades of more experienced traders, taking the opportunity to make profit.
- Low effort: Do not need to analyze the market, click buy and sell.
- Saves time: Trades transpires without you having to monitor the markets 24/7.
- Customised: Users are able to select traders, to copy risk and to specify fund allocated to each and to preset 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 relies entirely on the success of the copied trader. The result can be a significant loss, if not due to a bad strategy then due to the unpredictable nature of the market.
- Fees & commissions: Some brokers may charge fees or commissions for copy trading that could eat into 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.).
Copy trading is an increasingly popular feature that democratizes how crypto is traded, allowing individuals to copy the trading strategies of top traders. Though, as mention previously, it does offer an option for getting profits without going through the “tough work,” but you have to understand that there are some risks involved such as high market volatility and one remains dependent on traders’ activity. If you want to take the shortcut to the fast-paced cryptocurrency space, trading under experts through copy trading is a wise decision to make.
