What is Copy Trading? A step by step beginner’s guide.
Copy trading is not voodoo and it’s not rocket science. Let’s learn the in’s and the out’s together so you can dive into any type of investing with confidence.
What is Copy Trading?
Copy trading is a strategy whereby we exactly copy the trading ( or investing ) strategy of a much more experienced and battle hardened trader and profit from his/her experience in order to achieve consistent positive results for our portfolio. It’s a strategy whereby a new trader can gradually learn the art of trading while simultaneously seeing the results of a good strategy materialised by solid gains inside his/her portfolio.
If we can be honest with ourselves, 2020 has been more than a challenge for many people and companies across the world. It became more than evident that learning new skills and adapting to new challenges became a necessity and not only a “nice to have” option for future life’s development. Some have picked up a new language, arts or music, while some of us have decided to dive head first into the crocodile infested lake of trading assets, securities and even cryptocurrencies. Trading, as you can imagine, is something completely different than what a normal person is used to handling on a daily basis. A trader navigates the treacherous waters of the markets with calm nerves, clenched iron fists of action and velvet gloves of patience and undivided attention. It’s a skill that is completely foreign to pretty much all the laws of human nature. Therefore only a handful of traders become consistently profitable. Copy trading allows newcomers to directly copy all the moves of these traders without having any experience whatsoever.
It takes years to become a consistently profitable trader. People spend countless hours and make endless mistakes. One has to become completely emotionless to the idea that you can actually lose money while trading and just enjoy the waves of volatility and the ever present risk. It’s only logical that when you’re starting out as a green trader, it makes sense to learn from the old wolves who certainly earned a few medals and scars along the way.
How does it look like you say? Imagine you see a trader X who’s made a conservative 11% on his trades across a decent period of time. You hit “copy” and presto! You’re profiting from his success just like magic. Your capital is automatically split across his trading positions and you open and close trades just like a pro. Sounds almost magical, but It wasn’t always like this. Let’s see how copy trading came to be.
A little background history on Copy Trading
You probably can’t imagine this, but trading was once seen as a privilege granted to a few lucky players. Brokers served as gatekeepers that allowed a few wealthy mortals to participate in the markets ( provided they coughed up a sizable commission for their services ). It was an elite club of movers and shakers exercising in short term speculation and long term investing of shares and assets alike. We still had a bustling, trading floor hidden under a thick curtain of cigarette smoke where emotional traders ran, shouted, cursed and celebrated. A place where hand drawn charts, mahogany tradings desks and endlessly ringing phones presented an awe inspiring view. Definitely not a place for the timid among us.
But just like with all the advantages in modern technology, the adoption of computers and telecommunication allowed the traders a most welcome escape from the trenches of the trading floor right into the spacious high rise offices of the modern glass and concrete jungle. This period is off course personified by Gordon Gecko from the film “Wall Street”, the 1980’s electronic music and off course the self obsessed yuppies with brick-like cell phones and obnoxiously colorful sports cars. Fortunes were earned and lost in the markets, just like a century ago and again out of all things democratised, trading was definitely not it.
However when the endless web of fiber optic cables flattened the world for pretty much every one of us, we have at last witnessed a permanent change. Not only in trading, but pretty much in everything that we take for granted today. We saw knowledge becoming accessible to anyone with an internet connection and off course we saw our friend Tom create Myspace as one of the first most used social networks of our time.
Our great grandparents would proclaim us insane after our request to “like” our “profile”. They would most likely call us a psycho drug addict after finding out that we are “following someone on Instagram”. This is exactly the reason why copy trading is possible today. The playing field has been flattened. You can now live in Ghana, copy the strategy of a Japanese trader, while having your accounting done in Suriname by a Brazilian tax specialist. It’s truly remarkable when you think about it and there are few important aspects of copy trading that we need to cover. So let’s not waste any time and dig right in!
What are the advantages and disadvantages of Copy trading?
Our modern world seems to have the attention span of a Tik Tok video and we have all but lost our ability to focus. Therefore not many of us have the patience to sit at the grindstone of a seasoned trader sensei to hone the skills ( and honestly these days not many have the time either ). We want to learn, but we also want to see fast results. Therefore copy trading allows anyone to connect to the trader and learn as they go, while simultaneously seeing a growing portfolio in case the trader is consistently successful.
We don’t need to have any skills when we copy trade. We simply have to find our favourite trader with a good record and consistent positive performance. And remember since our digital world is now interconnected, there are many good traders out there and all of them are professionals in their favourite fields. You want foreign currency trading? Done! You want mining stocks? Done! You want soybean futures? Done! There are literally endless possibilities to choose from.
Back in school we were taught how to work for our income. With copy trading the name of the game is passive income. While you do have to monitor the progress of your account, the whole system pretty much runs on autopilot. Jesse Livermore ( one of the most successful traders of the past century ) would have undoubtedly seen copy trading as some form of magic.
Of course just like with everything in life, every coin has 2 sides and it’s therefore crucial to cover the disadvantages of copy trading. First and most biggest of all, is the danger of becoming passive. If we don’t enter this business without clear goals and determination, the act of copying traders can make us lazy and unwilling to learn. This is why we must always rekindle that child-like curiosity that’s been hammered flat by years of media consumption and a dangerously comfortable existence.
Also let’s step away from political correctness and boldly use the “F” word: Fees! Most trading platforms are interested in generating fees from every trade that passes through their digital bridge. That’s just the nature of their business and we must always keep this in mind. There are off course ways around this and some platforms do a better job than others. Let’s focus on one example.
How Tycoon Platform is changing the Crypto Trading world
It is without a doubt that we can see that the cryptocurrency space is the best gift that any trader has come across for the past decade. It’s a sea of endless volatility that can be navigated with the proper use of Technical, Fundamental and On-chain analysis. The gains that are made in the cryptocurrency space literally unmatched with any other asset out there. Not even mining stocks ( once considered to be the most volatile asset in the world ) can reach the level of cryptocurrency when it comes to violent swings and price movements.
Enter Tycoon platform. A long time ago a professional trader saw the need for a new kind of social trading platform, so after years of sweat and hard work it has finally seen the light of day in 2020.
We’re talking about a no nonsense interface that seamlessly allows new users to connect to their favourite traders by means of an Application Programmable Interface ( API ) and follow the progress of their portfolio in real time. While other platforms nibble away the profits here and there, Tycoon choses to use a transparent system of a pretty low connection fee that can even be lowered by the use of the TYC token.
The key here is simplicity and transparency. There are no complicated piles of paperwork and endless daily reports. There is instead profit sharing that happens only when a trader has a successful and profitable track record. The followers are happy with the passive income and the traders are incentivised to create their own blooming community that they can keep the followers informed on their strategy via their social news feed.
There’s a quiet murmur among traders that we’re heading into the biggest bull market in the cryptocurrency space that will dwarf even the gargantuan profits of 2017-2018. If that is indeed the case, it’s definitely not too late to hone your trading skills, sharpen up your Technical Analysis skills and roll up the sleeves while sifting through white papers and coins metrics platforms. This market will take everyone by storm and it’s truly a chance to earn generational wealth for years to come.