Copy Trading Explained: What It Is and How to Get Started

What is Copy Trading?

Copy trading enables participants to replicate the trades executed by other, often more experienced, traders in real time. The concept revolves around identifying a trader with a proven track record and mirroring their trades.

Typically, three key parties are involved in copy trading:

• Provider: The trader whose trades are being replicated. Often referred to as a "Master Trader" or "Signal Provider."

• Copier: The individual copying the provider's trades using their own trading account.

• Broker: The platform facilitating the connection between the provider and the copier, often through software or applications like MetaTrader 4 (MT4).

How Does Copy Trading Work?

Brokerages offer copy trading software that connects traders and their followers. Here’s how it works:

1. Account Setup: Traders sign up with a brokerage and link their accounts to the copy trading platform.

2. Performance Monitoring: Signal providers build a track record. Their performance metrics, including monthly returns and profitability, are displayed in the app.

3. Selecting a Signal Provider: Copiers choose traders to follow based on their performance metrics. Once connected, all trades executed by the provider are replicated in the copier's account, adjusted for available funds and risk preferences.

4. Fee Structure: Signal providers typically charge a percentage of the profits.

How to Start Copy Trading

To begin copy trading, follow these steps:

1. Open an MT4 Account: Create a live trading account. You can open additional sub-accounts for flexibility, such as one for manual trading and another for copying trades.

2. Connect to a Copy Trading Platform: Link your live account to a preferred copy trading system. Once connected, you can browse available providers.

3. Analyze Provider Stats: Review trader profiles, focusing on their past performance, drawdown, and trading focus.

4. Adjust Risk Settings: Customize risk preferences to align with your goals. You can control trade size and overall exposure.

5. Start Copying: Click ‘Copy’ to begin automatically replicating trades.

6. Monitor Your Account: Regularly check your account to track performance and ensure sufficient margin.

Tip: Copy trading isn’t limited to forex. Providers may specialize in forex, stocks, indices, commodities, cryptocurrencies, and more.

How to Copy Trade on the XtremeMarkets App

1. Discover Providers: Log in to the XtremeMarkets app and use the "Discover" tab to browse signal providers. Providers can be ranked by performance.

2. Search for Specific Providers: If you know the provider’s username, use the search feature.

3. Review Provider Profiles: View detailed stats, trading history, and achievements.

4. Set Risk Preferences: Customize trade size and decide whether to copy existing trades.

5. Start Copying: Confirm and start copying. The app will handle trades automatically.

6. Adjust or Stop Copying: Modify settings or stop copying anytime through the "Account" page.

Advantages of Copy Trading

1. Flexibility: Copiers can adjust trade sizes to align with their account balance and risk tolerance.

2. Efficiency: Trade alongside top traders without dedicating extensive time.

3. Transparency: Performance metrics of providers are publicly displayed.

4. Diversification: Use copy trading as a tool to complement your strategies and explore new markets.

Disadvantages of Copy Trading

1. Choosing the Right Trader: Requires research to evaluate traders based on more than just returns.

2. Risk Exposure: Losses are copied just like profits, and market conditions can affect outcomes.

3. Additional Costs: Some providers charge subscription fees.

4. Market Risks: Issues like slippage, rejected orders, or platform outages remain potential challenges.

Key Copy Trading Terms

• Fixed Size: Specifies a trade size, independent of the provider’s trade size.

• Mirror Master Size: Copies the exact trade size of the signal provider.

• Mirror Master Risk: Adjusts trade size proportionally to your account balance, matching the provider’s risk level.

• Max Drawdown: Maximum allowable loss before trading is suspended.

• Warning Level: Notification when drawdown reaches a set percentage.

• Soft Stop Level: Halts copying when drawdown reaches a specified threshold.

• Hard Stop Level: Closes all trades and suspends copying when drawdown hits a critical limit.

Copy trading offers a convenient way to leverage the expertise of skilled traders while retaining control over your risk. However, thorough research and ongoing monitoring are essential to ensure successful outcomes.