Copy and earn: what is copy trading in cryptocurrencies

Description

In the evolving world of cryptocurrencies, it would be pertinent to discuss a method of earning such as copy trading, which significantly saves time and effort in learning new information, as well as reducing the time spent on studying charts.

In this article, we will talk about what copy trading is, its advantages and disadvantages, the working principle of a copy trading platform, and how copy trading differs from mirror and social trading.

What is Copy Trading: Advantages and Disadvantages

Copy trading is a trading strategy where a user (copy trader) copies the trades of a leading trader (lead trader). This form of trading allows investors to copy the trades of experienced traders, thereby utilizing their knowledge and strategies for their own investments.

It should be noted that this approach lowers the entry barrier to the world of trading for beginners, offering them the opportunity to learn, make conclusions, and avoid typical mistakes.

The advantages of copy trading include:

• Time-saving. Due to the automation of the trading process, the investor is practically freed from the need to constantly monitor the market, as well as delve into the intricacies of trading.
• Diversification. Copying trades from other traders also allows for risk distribution and increases the chances of profit.
• Reduction of emotional decisions. Decisions are made based on the strategies of successful traders, which helps avoid impulsive actions. The investor can avoid FOMO by transferring the "burden of responsibility" to a more experienced trader.

It's also worth discussing the disadvantages of this type of trading:

• Risks in choosing a trader. The incorrect choice of a trader can lead to the loss of part or all of the invested funds.
• Lack of education. Simply copying the trades of other traders does not provide real trading experience.
• Copying trades ≠ guarantee of profit. Even the most successful traders can incur losses during various trading periods.

How Copy Trading Differs from Mirror and Social Trading

Copy trading evolved from mirror trading, which involves copying a trading strategy, not individual trades: developers share trading histories, and traders choose and repeat the most profitable algorithms.

Mirror trading allows for the combination of several trading strategies. Users of copy trading platforms copy trades without access to the actual strategy.

Social trading is a broader concept that includes the exchange of trading experience and various ideas on social networks. Typically, traders give recommendations to subscribers, who either follow them or learn without making any trades. This can be considered the main difference from copy trading, where users replicate all of the lead's positions.

It is also important to distinguish copy trading from managed accounts. In the latter case, the investor hands over their deposit into someone else's hands, rather than merely copying trades.

The Working Principle of a Copy Trading Platform

Copy trading platforms usually require registration and account setup. Investors select a trader to copy based on their trading history, rating, and risk level. After setting up the copying parameters, the selected trader's trades are automatically copied to the investor's account. Investors can adjust settings or stop copying at any time.

Where You Can Use Copy Trading

If the discussion is about cryptocurrencies, then of course, copy trading is available on popular cryptocurrency exchanges, such as:

• Bybit;
• OKX;
• HTX (Huobi);
• Mexc;
• KuCoin;
• BingX;
• Bitget;
• Gate;
• Binance (banned in Russia).

Conclusion

Copy trading represents an attractive tool for novice investors, allowing them to benefit from the experience of professionals, saving their most precious resource – time. However, like any investment strategy, copy trading comes with certain risks and requires careful selection of a trader to copy. Investors should consider all the advantages and disadvantages, as well as carefully choose a platform to maximize their chances of success.

In this article, we discussed: what is copy trading, its advantages and disadvantages, compared copy trading with mirror and social trading, talked about the working principle of copy trading platforms, and also provided examples of where you can use copy trading.

This was a brief article. If you have any questions, feel free to ask them in the comments.

We hope you found the article useful. Wishing you successful and profitable investments!