Is copytrading a viable strategy for beginner traders?

Thanks for sharing your useful insights. I will definitely consider these factors before choosing a trader to copy trades. Do you have any other tips regarding copy trading?

You should always keep in mind that even the pros can have a bad day and may suffer losses. And that’s okay! Think of it as a chance to learn and improve. I’d love to hear how it goes when you give it a try. :slightly_smiling_face:

Copy trading looks a good choice if you accept the following as facts -

  1. as a new trader I must invent my own strategy in order to be profitable
  2. strategies that generate trade signals are too complex to replicate so I must just passively accept the signals it produces

But these things are not true.

No copy trading is not valid unless you are very lucky, their strategies martingale and when it blows up they create a new strategy/account, if you go to Quora and use this Are-hedge-fund-managers-actually-intelligent/answer/Alister-A you will see something I wrote about that on Collective2. I have access to institutional fintech with stock research and analysis, copy traders will have none of this so what you will find is that if they target above 3-5% and 7-10% pa (per year), they will implode as the markets make it a foregone conclusion.

There is something else I wrote, provided to me by fund managers, that unless you can protect 80% of your profits you will not just lose your profits but will also expose your underlying capital to the markets, this is something you truly do not want to do as mrkets are experts and it changing hands, yours to theirs.

If you could time entry and exit in to the strategy then it could work, but you will not be able to do this except via luck as even the best economists and fund managers cannot exactly time exit, they can only time a range which is too wide to guard the profits if you over extend the returns profile, and therefore expose the capital without the tools or experience, something copy traders do not have.

The companies I know have strategies coming out of their ears, they asked me to talk to these copy trade platforms for things like Ultra Wealth ETF, Digital ETF, managed funds, assets which float like currencies, ICOs which they have 100s of, if you take Collective2 they only have 2,500 active people buying strategies averaging $100/mth for a strategy, making $250,000/mth in revenue split 50% for the strategy developer across ALL strategies on their site.

Statistically you will always get someone getting it right, for some time, but I can assure you none of them can guard 80% of profits over the medium to long term, so unless you exit while the going is good you will experience the massive drawdown, if you exit precisely enough when that happens you will breakeven, if you hesitate which is what everyone does it will evaporate capital, but this is what the markets were designed to do.

Hey there! I’ve been doing well with trading and now I’m interested in sharing my trades on a copy trading platform to earn some extra bucks :wink:.
Just wanted to make sure I know what I can do and what the rules are. So, are there any restrictions for traders in terms of the instruments or markets they want to trade on?

Restrictions vary from platform to platform. For example, in platforms like zulutrade and pelican, you have the flexibility to select a broker of your choice and trade in instruments or markets provided by that broker. On the other hand, there are some brokers like etoro and naga who offer copy trading but they do not give you the leverage to select any broker of your choice. In this case, you have to trade in only those assets that they are providing.

So, it’s important to carefully review the terms and conditions of the copy trading platform you are considering to ensure that you understand the restrictions and can go ahead with them.

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I already have a trading account with my broker. Can I just connect it with zulutrade or do I have to open a new account?

As far as I know, yes, you can connect your account with zulutrade directly if they support your broker. Just check with their support team to make sure everything is good to go.

Can I customize the trades I copy or do I have to copy everything a trader does?

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It differs from platform to platform. Some of the platforms that provide customised trading are zulutrade and etoro.

Would recommend checking out their terms and conditions before diving into copy trading.

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Is there any way to protect my trading account from potential losses when following other traders?

No copytrading is not viable, Collective2 have 2500 paid subscribers across their entire portfolio, each strategy is around $100 to $200 per month, which means $150k per month spread between all the providers.

I know because I was the one who looked in to it, I have access to algos that do 99% of the work consistently year in year out, so it’s no effort to place the trades on another platform but was advised against it.

The problem is that other strategy providers can build a strategy that lasts months and bursts the returns profile, the markets change and then invalidate their strategy, they create a new strategy with the same profile, rinse and repeat, but the loss curve when it fails is spectacular, this is copytrading unless they target 1-2% per month.

Copy trading is the best option for a beginner, it can be a useful tool for learning about the market and getting started with trading.

Copy trading allows you to follow and replicate the trades of other traders. This can be a great way to learn about different trading strategies, styles, and asset classes. Just remember that even they have losing trades, it’s essential to learn from both their successes and mistakes.

Before deciding to copy a trader, research their track record, trading style, and risk profile. Make sure they align with your own risk tolerance and trading personality. Blindly following someone without understanding their approach could lead you to blow your account!

While you’re following other traders, remember that YOU are ultimately responsible for your own trading decisions. Like in any form of trading, it’s not without risks, and there are no guarantees of success.

Make sure you’re cool with the risks you’re taking and are prepared to face the reality of losing a bunch of money because you copied someone else’s trades.