Forex copy trading is a way to invest in the financial markets by copying other traders. It makes it easier for new and inexperienced investors to get exposure to Forex without learning about technical indicators and economic releases.
Copy Trading Explained
Forex brokers offer copy trading as an add-on service for their clients. Once you sign up with any broker that provides this service, your account will be put into a queue and linked to another trader’s account. Thus when you enter trades and click on the buy (or sell) through your mobile device or computer, the trade will be automatically executed at the same time on the person who copies the trading link you have chosen.
The trader whose trading activity you are watching does not necessarily need to be a professional Forex trader or an experienced one. You can choose the account of someone just starting in the market and copy his actions until he becomes a successful trader himself.
As with any automatic copying system, there is a chance that your account may be copied into a losing trade. It’s not unusual for new day traders who do not have the experience to react when they see unfavourable deviations from their trading plans. If you opt for low-volume traders, the risk of losing money should discourage many from allowing someone else to make the decisions.
But what makes copy trading attractive is that it helps users find good forex brokers without delving into technical indicators and economic releases themselves. It is a tool to help teach you the basics of forex trading and gain some confidence before taking your first steps in the market.
Copy Trading Scams
There are many copy trading scams around, so here is what you need to know: You must do thorough research about the broker offering copy trading services before committing any money. Ensure that they use an NFA (National Futures Association) regulated clearing member for their operations. Your account will be linked directly to them, and it would be unfortunate if your hard-earned money gets lost.
Brokers
Most brokers who offer this service set aside a few requirements for investors:
- You should not have less than $1,000 in your account.
- The trader whose trades you wish to copy should have at least $10,000 in his account.
- Your withdrawal amount should not exceed the total margin available in your trading account.
An important consideration is that the broker may change the terms of its services agreement on short notice, so be sure to read all fine print before signing up with a particular service provider. This way, you will reduce your chances of being taken advantage of by a dishonest broker seeking to make a quick buck while leaving you with nothing but losses.
Forex Copy Trading Platforms
Many Forex copy trading platforms are available online to help you achieve your financial goals. However, not all have the same features, ease of use, and costs. It is essential to take time before signing up for a platform to research each one’s track record, customer support services, types of accounts offered, etc. Please don’t be too hasty to sign up with the first platform you encounter either; it pays to do your homework!
Withdrawals
Withdrawals for users on most Forex copy trading platforms are streamlined to occur effortlessly and at no additional cost. However, fees may apply depending on what type of account you use (micro/mini/prime vs ECN/NDD) and how much you signal. There may also be a minimum requirement to withdraw, and you should make sure that this amount is something you can afford to lose if your investments turn sour (for example, $500).
Bottom Line
You need not necessarily start trading by yourself right away if you sign up for Forex copy trading. It may even help to take some time familiarizing yourself with the platform’s features and getting comfortable with their user interfaces before actually committing any money. No two platforms are the same; each has its strengths and weaknesses.
Please refer to the link for more information on the Forex trading demo account.
