Cryptocurrency trading is attractive for traders because it might be very rewarding due to the high volatility. At the same time, in order to master copy trading strategies, you need to have strong skills in fundamental and technical analyses. Besides, you should be aware of how blockchain ecosystems work and what affects the prices of cryptocurrency.
Most traders, lack the time and experience to study the cryptocurrency market so specifically. Luckily for them, there are special solutions that help such traders to get into the cryptocurrency trading industry and simplify the most complex things.
In this short guide, we will discuss the cryptocurrency copy trading approach. You will learn what it is and how it works in the market of digital assets.
Introduction
In a nutshell, a crypto copy trading platform is a special digital tool that one group of traders to share their trading strategies to be copied by participants who aren’t experienced to build their own trading plates. If you copy one trader, your account will automatically make the same trades.
In fact, everything you need to succeed in copy trading is some time and patience to find a good trader to follow. Once you copy somebody, you don’t need to make complex technical analyses of the cryptocurrency market and study the fundamentals of coins.
Many beginning crypto traders use copy trading platforms as educational tools. Except for just copying trades of more experienced participants, they can study their methods, learn how to spot trends and their reversals and understand how to make smart investments in digital coins on their own.
Now, once we’ve explained the basics of cryptocurrency copy trading, let’s answer the most common questions about this method of earning money in the market of virtual coins.
How does it work?
Here are the steps you should take if you want to take advantage of copying cryptocurrency trades.
1. Find a trader to follow
We skipped the step of registering on the platform that enables crypto copy trading because that’s obvious. Once you have a trading account, start looking for a trader whose deals you are willing to follow. The success of this trader will directly affect your profits, so be careful with this research. Examine different parameters of the selected traders to narrow down the list to one or two traders. Find out the profitability of their methods, the amounts they allocated to strategies, the tools they use, and other parameters that are displayed by your copy trading platform.
2. Set up the software
The majority of copy trading software solutions have to be set up in accordance with your needs if you want them to be efficient for you. This process might be time-consuming but we don’t recommend skipping it and relying on the default settings of the software.
We suggest that you should set up your copy trading software in a way that you are able to make your own decisions from time to time in order to be able to determine whether it’s necessary to take the action.
Also, you can set up the tool in a way to have the possibility to follow several traders. This will increase the level of diversification and will help to hedge many risks related to copy trading.
Is copying cryptocurrency trades legal?
The technology of copy trading isn’t new to the world of online trading. That’s why you can find this feature at many reputable brokerage services and cryptocurrency exchanges.
Besides, some trading software solutions are supervised and licensed by respected institutions from the world of finances, such as FCA, ESMA, and others. Before registering an account at any copy trading platform, make sure it corresponds to the safety requirements imposed by such regulatory bodies.
Although the cryptocurrency market lacks regulation, you should face any legal issues because of copy cryptocurrency trades. Similar to CFD, margin, or spot trading, this is a completely legit method to make money online.
What are the risks?
Crypto copy trading can be a great source of passive income. However, your success heavily depends on the copy trading platform and traders you follow. Every move is important because one failure can spoil the entire crypto copy trading experience.
To avoid the risk of starting following the wrong trader, make good research and verify the sources from which you get information about a trader and his or her profitability. It’s not enough just to study a profile. Such a lazy approach is often worth beginning traders hundreds of thousands of dollars.
Besides, no one can guarantee you for sure that the chosen crypto copy trading software won’t fail or stop working. That’s why, in order to avoid such a probability, we suggest that you should monitor trades on your own, not just let them be copied automatically. If you miss a bug in the system, the consequences might be very dramatic.
Last but not least, keep in mind the extreme volatility of the cryptocurrency market. Even if you find a very successful trader with a super efficient crypto trading strategy, no one can guarantee that the crypto market won’t collapse the day after you start following that trader.