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BUSINESS NEWS - Success in Forex trading is not rocket science. However, it does require experience, time, and persistence. Sometimes, even the most weathered of currency traders have little time for market analysis.
This is when copy trading comes in handy.
In Nigeria, this service may be accessed through a ForexTime broker in South Africa. But how big are the benefits?
The sheer volumes traded on the global currency exchange are stunning. Every day, over $6 trillion are bought and sold by institutions and retail traders. Individuals who benefit from the ever-changing currency rates may delegate decision making to strategy managers, which is the essence of copy trading finance arrangements. From Europe to South Africa, the service is used by millions.
How Copy Trading Works
The scheme is popular in the realms of currencies, stocks, and other forms of trading. The core of copy trading is delegation. It is up to you to decide which strategy manager to trust. You may choose a trader using specialized ratings on your broker’s website. Here, experts are usually ranked based on their performance and client reviews.
As part of the scheme, your accounts will be linked. Subsequently, all positions opened and closed by the expert will be replicated, i.e., copied in your account. Basically, it will look as if you were pursuing strategies that are identical to the letter.
Is It Safe?
Copy Trading is accessible through the most popular platforms provided by ForexTime. These are the industry favorites MetaTrader 4 and MetaTrader 5. The broker allows you to monitor the replication closely canceling separate trades if you consider them undesirable. Clients may always terminate the connection if they wish to.
Importantly, delegation refers to decision-making only. No physical transfer of funds between the account is performed. Hence, the money traded is still yours. Usually, you need to follow a special proportion used by the broker. For instance, you may only be allowed to involve a certain share of your balance.
The Strategy Manager will only receive their fee if the trade is successful. Hence, it is in their best interests to ensure financial gains. Overall, copy trading is an arrangement involving you and the other two parties. These are:
The Broker
This is your guide and facilitator in the world of online trading. The broker registers your account and functions as an intermediary providing digital access to the international exchange. Some of these firms operate as copy trading platforms.
The Copied Trader
Known as Strategy Manager or Signal provider, this is the expert whose decisions are copied. As a client, you may choose who to follow based on ratings available online.
How Is Profit Made?
The process involves five main stages. First, you need to pick a Strategy Manager from the list of candidates. Next, you should make sure there are sufficient funds on your account and deposit more if necessary. This is when trade copying may be launched. The system is fully automated for maximized convenience.
In a scenario mentioned by FXTM, you may entrust the Strategy Manager with $1,000. If they use the sum for trades resulting in a profit of $500, you are entitled to a lion’s share of it — $450. The rest v - $50 will constitute the expert's reward or a 10% fee.
Now, you may cash in and enjoy the benefits of profit without your active participation. Importantly, the fee is paid to the Strategy Manager only if their trades are profitable. Hence, if they make a loss, they are not entitled to any commission.
A Few Important Considerations
Although copy trading may improve your results, it should not be perceived as an error-proof strategy. Naturally, a more experienced trader is likely to be more successful. However, the positions they choose may bring profits, as well as losses.
Most reliable brokers provide ratings of their top copied traders with details on their past performance. If the copied trades do not meet your expectations, you can always terminate the connection or cancel individual positions.
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