Always on the lookout for additional sources of income, investors do not hesitate to explore new avenues of investment. Among the many sectors that welcome new “players” day by day is the world of trading. Even if trading may seem like a somewhat complex process, many means have been put in place to make it easier for everyone, new or veteran, to adapt. Among these means, we can cite copy trading. A very fashionable technique made available by certain brokers, including the famous eToro.
In this article, we will get to the heart of copy trading to examine whether this strategy is actually a good investment strategy.
What is copy trading
Etymologically, “copy trading” is the result of “copy” which means “copy” and “trading” defined as being an… activity consisting in buying then selling financial assets on different markets (currencies, commodities commodities, stocks…) with the intention of making more money. Clearly, copy trading is presented as a trading technique that aims to “copy” or follow the positions of another trader or investor. If you want more information on copy trading, don’t hesitate to visit the Droitdunet website.
The different types of copy trading
Automatic trading
This type of trading involves choosing a trader whose strategy matches your risk tolerance and style. Thus, whatever the type of transaction carried out by the trader on his account, these are replicated on your own account.
Semi-automatic trading
This technique consists of not automatically copying trades from a “pattern” but rather following a trading signal provider. In this case, it is up to you to choose the trades that interest you according to your risk management
Manual trading
Unlike the two types of trading presented above, in the case of manual trading, the decision to enter or exit the trade is taken directly by the trader himself. However, the trader very often exploits the information to be provided to him by various programs and technologies.
Copy trading: a risky investment strategy?
Even if there are in reality different types of copy trading, we very often liken copy trading to automatic trading. Seen on this level, copy trading makes you dependent on the technology and the trader you are copying. It also takes away your ability to analyze since everything relies on the skills and analyzes of others. The low level of confidentiality of copy trading is also a risk factor.
But beware, copy trading beyond these disadvantages also has advantages that can reassure investors. Indeed, this technique has really come to revolutionize the trading sector in the sense that it allows even the novice to get by easily. Moreover, copy trading allows you to trade at any time of the day. Thus, you manage to increase your income while carrying out your daily life as usual. The big advantage of copy trading is also this gain of around 300% that it is possible to earn. Even if this gain is a function of certain factors, the fact remains that copy trading is a great opportunity. However, it will be necessary to pay attention to the pompous advertisements that one finds here and there. The AMF (Financial Markets Authority) also insisted that traders remain vigilant in the various choices that must be made, especially that of the broker.
In order to discover many tips and tricks relating to the financial sector, do not hesitate to click here.
eToro the broker for safer copy trading
Created in Israel in 2007, the broker eToro which is more and more talked about, ends up launching in 2010, a social investment platform including the copy trading functionality. During this same year, the broker’s Android application will see the light of day to the delight of traders who will now be able to buy or sell products from their phones. With over 12 million active traders, eToro boasts the largest community of traders. In order to start copy trading with eToro, you must first open an account by providing some information which will then be verified. After a deposit of funds, you can start copy trading with confidence.