Copy Trading  

Copy trading enables traders or investors to imitate others by performing the same operations that others do for their own account.

Copy trading is a trade selection method mainly used in the currency markets. It is a strategy that allows investors to copy the trades of experienced and successful Forex investors and perform the same trades in almost real time on their own accounts.

Initially, Copy Trading was only available to institutional clients, but since then it has been made available to retail investors in a number of ways.

From the mid to late 2000s, copy trading inspired other similar strategies such as mirror trading and social trading. Its automated nature can help prevent investors from making emotional trading decisions.

Mirror traders in the forex markets often use a brokerage trading platform (software similar to MetaTrader version 4 or 5) to examine the history and details of various trading strategies. You can use the services of brokers such as Zeal Capital Markets or ZFX to start Copy Trading. After examining the performance characteristics, the trader selects an algorithmic trading strategy from the options available based on his investment goals, risk tolerance, investment capital and desired assets.

For example, if a trader has a low tolerance for risk, they can mirror a strategy with a low maximum drawdown. When strategy developers execute their trades, those trades are duplicated on the mirror trader’s accounts with automated software, hours a day, 5 days a week. with the intention of replicating similar results.

Advantages:

1. Reduced emotions
2. Verified results

Limitations:

1. Robustness of strategies
2. Risk assessment