Copy Trading: Meaning, Strategies, and Risks Explained

Trading is not an easy task. You need to be very cautious of every move you make, or else you can end up making losses. But today this has changed greatly. With the new types of trading emerging, even beginners are able to perform trades well. 

The most common forms include algo trading and copy trading. These two have changed the trading quite prominently. But where one uses the AI and algorithms for helping the traders, the other one is focused on following the expert traders and their strategies.

This way, beginners can benefit from the knowledge and experience of experts. So, let us explore what copy trading is in this guide. Understand what it is, its features, and everything you need to have better trades.

What Is Copy Trading?

Copy trading is a trading method that is used to trade in various assets in the stock market. It is a method where an investor automatically replicates the trades of another experienced trader. In simple terms, the traders follow the same steps that experienced traders use to buy and sell stocks in the market and in real-time.

This system connects a trader’s account with the investor’s through a trading platform. Now, it is up to the investor to choose whom to follow. This choice is usually based on various factors, like:

• Performance

• Strategy

• Risk profile

The main idea is to let beginners benefit from the expertise of skilled traders. And all this is possible with no need for in-depth market knowledge.

Key Features of Copy Trading

Copy trading is one of the finest trading strategies that beginners can use. The key features are as follows:

• Automated Trading: Trades are replicas of the experienced traders and are performed in real-time.

• Transparency: Investors can check previous results and compare options before finalizing whom to follow.

• Flexibility: There is no limit on the amount to invest, which is a great deal.

• Learn Skill: This is a chance to learn a new skill. They learn financial and technical analysis by following experts.

• Diversification: Multiple trading strategies can be adopted for better returns.

Pros and Cons of Copy Trading

Just like any other form of trading, copy trading also has its own pros and cons that you must know. These are shared here.

Pros

• Easy entry into trading with minimal experience required.

• Saves time by automating trade execution.

• Logic-based trading for good returns.

• Can invest in multiple assets beyond stocks and bonds.

• Learn the market better with expert guidance.

Cons

• Reliability on experts is high.

• Risky due to high volatility.

• High commission or fees.

• Past performance is not a guarantee of future returns.

• Limited control over the trades.

How Copy Trading Works

Copy trading sounds easy, but it is possible only when you have the right platform. Knowing the steps is also important. These include the following:

1. Choose a Reliable Platform

Start by selecting a trusted copy trading platform. Ensure to select a platform that is transparent and offers you effective and secure fund management.

2. Create and Verify Your Account

Complete the registration. Ensure to provide the required KYC and do proper verification to get started with proper rules. 

3. Research and Select a Trader

Check the list of the traders available. Select the one who you think best matches your trading needs. Evaluate the history, success rate, and risk before starting.

4. Set Investment Amount

Plan how much to invest. Focus on portfolio diversification as well for a good asset allocation plan. 

5. Enable Copy Trading

Once selected, activate the same. Your trades will now be copied from what plan you have selected from the experts.

6. Track and Manage Performance

Monitor the trades you do. If you find them offering good returns, then continue. Otherwise, you can pause and stop as well and make changes as needed.

Mirror Trading vs Copy Trading

Many people confuse mirror trading with copy trading. But both are different in nature. The key differences are as follows:

Is Copy Trading Legal in India?

The legal aspect of copy trading is still in question. Currently, the Securities and Exchange Board of India (SEBI) has not provided any kind of approval for any such platform. 

This means that though people use copy trading in NSE or BSE, it is not fully governed and secured. But, if you are using it in a forex or international trading platform, then certain SEBI-registered brokers or platforms are authorized.

So, before you start, ensure you check the SEBI rules to safeguard yourself. 

Conclusion

Copy trading is perfect for beginners. It is a chance to not just earn good returns but also use proven strategies that can help you with better trades. But if you are looking to learn trading from scratch, you need a trusted platform for you.

This is where you can start trading on Rupeezy. Simple to use and with various tools, this platform is perfect for you if you need support, guidance, and the right solutions.

Explore secure and efficient trading options today!

FAQs

What is copy trading in simple terms?

Copy trading is the method of replicating the trading strategies of experts to earn good returns as a beginner trader.

Can I lose money in copy trading?

Yes. If the trader you follow makes losses and you copy, then you can make losses as well.

Is copy trading good for beginners?

Yes. It is a good learning point for beginners. They can learn from experts and trade well in the future.

Do I need trading knowledge for copy trading?

Not much. Some basic understanding of the stock market can be a good start with copy trading. 

Is copy trading legal in India?

It is not officially regulated by SEBI yet. Always use SEBI-registered platforms to stay compliant and safe.