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What is The Copy Trading?

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Copytrading in the Forex market

The copy trading is a form of auto trading that allows traders in financial markets to follow and copy automatically the positions opened and managed by selected investors, usually through a network of social trading.

Unlike the mirror trading, a method that offers the trader the ability to copy specific trading strategies, the copy trading links a portion of the funds from the trader that follow and copy the positions with the investor account whose trades are copied. Thus, any action taken in the market by the investor copied  (the trading signal provider), such as opening a new position, the assignation of Stop Loss and Take Profit orders, or closing positions, are also copied and executed in the account of the follower trader according to the ratio between the signal provider account and the funds allocated by the follower trader for the trading copy.The follower trader usually retains the ability to disconnect the copied transactions  from the service (to avoid the reception of more management signals from the investor that is providing the trading signals) and manage the trades by itself. He also has the ability to terminate the relationship with the signal provider at any time. 

The copy trading has led to the development of a new type of investment portfolios, which some industry experts call portfolios “based on people.” These people based portfolios differ from traditional investment portfolios in the fact that the funds are invested in other investors, rather than traditional market-based instruments.

Concept and logic behind copy trading

Different platforms of copy trading use different logical and operating systems. Usually these platforms vary in terms of the minimum amount to open a copy trading  account, the maximum and minimum volume for each transaction copied, and how the profit/loss from operations performed by copied investor are reflected in the proportions between the followed- followers accounts, which means that the way in which the copied investors get benefits for their services may vary significantly from one platform to another. 

Some platforms also allow the traders to implement stop loss (loss limits) in their copy trading relationships with the trading signals providers.  This offers the ability to control the risk of all copy trading activity based on the individual investors copied. Thus, if a signal provider reaches a certain level of losses, the trader stops copying the transactions and the relationship ceases.

The Copy Trading in conjunction with social trading

Several companies which are specialized in providing trading services on the financial markets offer copy trading solutions as part of their social trading platforms. Among these companies, we can mention some of the leading Forex brokers, which are dedicating significant resources to social trading, one of the fastest growing areas in the field of financial markets, including Forex.

Social trading usually includes the ability to connect with other investors through various common tools in social networks (comments, shared links, “Likes”, etc..). It also offers the possibility of finding ideal candidates to copy their market trades by analyzing the performance statistics of the investors integrated to the social network. Usually, these platforms have fairly comprehensive and updated statistics of all investors, including follower traders and signal providers.

Some platforms also have tools to sort and filter the traders according to different performance parameters, which facilitates the selection of the best investors as signal providers to follow and copy their trades.

Copy traders providers

Currently, some of the most prominent solution providers of copy trading include companies such as eToro, FxPro, Zulutrade, Currensee, Oanda and others. Since mid-2010, the copy trading has become an increasingly popular service among online brokers of financial trading, including Forex brokers. Through their copy trading platforms, these brokers allow their customers with less experience in the markets to make profits with the trading decisions of investors who they believe are most profitable and whose trading strategies are considered most suitable according to the customer investment objectives.

Certainly the field of the Forex market has experienced the highest growth in regards to copy trading. Some of the leading providers of copy trading (mainly for the Forex market) are the following:

Social Network

Broker

Trading instruments

Review

Zulutrade

-It is associated with various brokers

-Forex

Today Zulutrade is one of the leading providers of social trading for forex traders. It has thousands of users from all over the world, including investors and signal providers (traders). It is regulated by the NFA and CFTC in the United States. Its platform for monitoring and signal copy is one of the most complete in the industry and is constantly improved.

-Forex

-CFD

-Precious metals

eToro has become a company specialized in social trading through its CopyTrader platform, which has a simple and easy to use interface. Today is one of the main social trading services and has thousands of users among investors and signal providers (traders).

FXCC FxStat Tradebook

FXCC

-Forex

-CFD

-Precious metals

FXCC, an ECN broker regulated by the Financial Conduct Authority and CySEC offers a social trading platform based in an application developed by FxStat Tradebook, one of the new players in the field of social trading. It offers the possibility to follow and copy the trades of successful traders and its biggest advantage is that the selection process of signal providers is quite complete.

-Forex

-CFD

-Precious metals

It is a social trading platform developed by FxPro, an ECN/STP broker fully regulated, which offers specialized services for both novice traders and professional traders. It has a very rigorous selection system of signal providers (traders), which means that the investor has access to traders with profitable trading strategies over time.

-Forex

-CFD

-Precious metals

YoutradeFX is a regulated Forex broker (ASIC of Australia and the Financial Conduct Authority in the UK) which offers a social trading platform that allows contact with other traders who with this company and follow and copy each of their trades in real time. The system offers the possibility to sort the best traders according to their performance in the market.

FXOpen FXStat Tradebook

FXOpen

-Forex

-Precious metals

This is another social trading platform based on the FxStat Tradebook system and was developed by the broker FXOpen for all its customers. As already indicated, this platform offers the possibility to follow and copy in real time any trade performed by the most successful registered traders (signal providers). The selection process of traders is quite strict.

Share4you

Forex4you

-Forex

-Precious metals

Share4you is a new social trading platform created by the broker Forex4you. One of its biggest advantages is that it allows to trade with very small transaction sizes, reducing the investor risk. This feature also allows to evaluate the performance of the selected signal providers. It has a simple and comprehensive interface and its popularity is increasing.

-Forex

-CFD

-Precious metals

It is a social trading network&platform which is fully integrated with Markets.com and its various trading platforms, especially Sirix Werbtrader (based entirely on the web). It can be integrated with the customer trading account so that the user can run the trades of selected traders as trading signals.

Social trading con 3TG Brokers

3TG Brokers

-Forex

-Precious metals

 

This is another social trading platform and network which is based on the platform Sirix and allows contact with a lot of traders who trade regularly with this broker. It offers the possibility to follow, copy and run automatically the transactions made by any trader who trades with 3TG Brokers.

Social Trading Network of BelforFX

BelforFX

-Forex

-CFD

-Precious metals

 

The broker BelforFX offers a social trading service integrated with its Sirix trading platforms, which allows its customers to follow and copy any trade performed by the most successful traders of the broker, all in real time. It provides detailed statistics for all traders integrated in the social network, and the copy procedure is quite simple since it requires a few clicks.

Social Trading Platform of Trade-24

Trade-24

-Forex

-CFD

-Precious metals

The Forex broker Trade-24 has a social trading service which is integrated with the trading platform Sirix. This platform allows to follow and copy in real-time the transactions made by any trader who trades regularly with this company. Currently it has thousands of users, including traders (signal providers) and investors who want to copy the trading signals of successful and experienced operators.

Studies related to the copy trading

In 2012, a study led by Dr. Yaniv Altshuler and funded by MIT, showed that traders in the eToro investment social network that benefited from the “guided copy”, ie traders  that copied the transactions of a suggested trading signals provider obtained results that exceeded between 6-10% the results obtained by the traders who traded manually. Also, the results of the traders who followed the suggested signals provider exceeded by 4% the results obtained by traders who copied random investors of their choice.

 

 


IQOption regulated broker

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