You can use copy trading as a way to invest in various financial markets. As a trader on a copy trading platform, you have access to cryptocurrencies, forex currency pairs, commodities, and even stocks. While the idea of copying a trader as they execute their trades seems quite safe, many people are on the fence about letting someone else take control of their trades. It’s like losing control on your own investments.
As someone who is thinking about either increasing their money or preserving the capital they already have, does it make sense to let someone else trade on your behalf? Well, the answer to that question is not just a yes or no. Let’s take a look at some reasons you can consider and trust copy trading.
You Already Trust Others with Your Money
Have you ever had a savings account? You probably have a good idea of what the bank does with your money when you deposit it in a savings account. Of course, a checking account is a completely different thing. However, when you open a savings account, the bank uses your money for investments. That’s another scenario in which someone else is taking decisions with your money. The same happens when you opt for insurance. When you go with the life insurance policy, yet again, you are giving the life insurance provider the consent of investing on your behalf. So, it’s not much different when you do it through copy trading.
What you can really admire about trading through this method is that it is pretty transparent. You select the trader based on their portfolio. You get to look at a lot of information about them before you pick a trader to copy. Also, you can change the traders when you want if you think they are not following the path you had chosen them for.
You Pick Traders, Not the Other Way Around
You could say that copy trading would become suspicious if you were being picked by the trader or at least if they could see information about you. However, that’s not the case at all. When you sign up on a copy trading platform, your information is limited to you only. The trader cannot see the information of the investors so they can’t pick them based on their choice. On the other hand, you can view a lot about the trader you pick. That’s exactly the point of copy trading i.e. you get to decide which trader you want to copy. You can look at their performance from a variety of angles.
Define your trading preferences and pick the one that you think will best align with them. Are you only prepared for a specific risk type? Do you want to invest your funds in a particular type of asset? Are you interested in investing in a particular market other than the US? You can set these preferences and pick a trader accordingly. This makes the process very transparent and also gives you another reason to trust your copy trading platform.
There Are Regulated Platforms
So, how can you trust the platform that you sign up with? Whether you are signing up with a broker or a copy trading platform, there are certain things you have to confirm to know the legitimacy of the platform. How can you know about that? Well, one of the first things to confirm is if the platform is registered. If it is registered, you can be sure that you are signing up with a proper business. Secondly, you want to confirm the licensing and regulation status of the platform. A regulated platform can provide you with reliable services and you can be sure that your interests are protected.
The good news is that there are many regulated platforms. They have completed all the steps of being regulated and provide you with reliable services. In fact, some of these platforms are regulated in multiple countries or regions. If you want to get this information, you will have to explore the website of the platform. Usually, you will find this information in the footer of the website or on the “about us” page. If the copy trading platform you have chosen is regulated, you can sign up with it without hesitation.
You Can Keep Your Existing Broker
So, it would make sense to explain to you how the copy trading platform exactly works here. The truth is that you don’t trade with the copy trading platform at all. It does not provide you with access to any financial market. Instead, it relies on a broker to give you access to those features and facilities. For this reason, before you sign up with a copy trading platform, you must have a trading account with a broker. Once you sign up, you have to connect this platform with your broker. If you haven’t signed up with one already, you can pick one at the time of signing up with the copy trading platform.
However, if you have an existing broker whose platform you currently use, you can keep it and be with the copy trading platform. That’s what makes online copy trading so much reliable i.e. they are not holding on to your money or investing on your behalf. They are only giving you access to traders on various brokerage platforms. How much you trade, the profits you make, and the risks you are exposed to are all factors still in your broker’s control.
What reasons do you think you have for not trusting copy trading? Are there any particular questions that you need answered? The fact that your platform acts only as a middle party makes it much more reliable because it doesn’t control your trades, keep your funds, or affect the outcomes of your trades. To make things even better, you can rely on your existing broker when you go with copy trading. With all these things in mind, there is no reason why you can’t rely on copy trading as a way to build your investment career.