Crypto Copy Trading-How To Copy Trade Successfully? (2024)

Ever heard of Crypto Copy Trading? It is also known as social trading, it allows you to replicate the portfolios and trades of expert traders.

Whether you are a crypto novice or an OG, diversifying your portfolio is crucial. What does crypto copy trading do for you?

This comprehensive guide aims to demystify the world of crypto copy trading, exploring its definition, and the myriad benefits it offers. As well as, crucial insights into its safety

Now that we are feeling bullish in the air, let us dive into one of crypto’s intriguing fields.

So, what exactly is crypto copy trading, and how does it work?

What is Crypto Copy Trading?

Many investors prefer investing over trading due to the complex nature of the latter.

Crypto copy trading serves as a bridge for both beginners and seasoned traders, enabling immediate involvement in trading with no need for pro technical skills.

It offers the chance to let expert traders assist in selecting coins for a well-rounded investment strategy.

While copying skilled traders’ portfolios reduces groundwork, it’s essentially to DYOR into the assets within the portfolio.

Understanding the trader’s investment choices provides valuable insights into your investments.

In the crypto context, this means mirroring the trading activities of seasoned crypto traders.

The underlying principle is straightforward beginners or less experienced traders can benefit from the expertise of more knowledgeable counterparts, essentisally copying their trading strategies.

To illustrate, imagine you are a novice crypto trader interested in Bitcoin. You come across a seasoned trader on a copy trading platform, who has consistently demonstrated success in Bitcoin trading.

Intrigued, you decide to allocate a portion of your funds to copy the trader’s actions.

Now, whenever the experienced trader opens a position, your account automatically mirrors that trade proportionately.

If they profit, so do you, if they incur a loss, your account also ref;ect that. This allows you to passively engage in the crypto market without actively managing your trades.

Platforms like Nested. Fi offers a social trading experience, allowing you to dollar cost average.

Alternatively, some platforms automate the process of trading bots but always remember to choose a platform that agrees with your goals.

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How to Use Crypto Copy Trading Platform?

Copy trading is atrading approachthat is quickly gaining popularity incryptocurrencies,forex,and stock markets.

Put simply, as the name suggests, copy trading means directly copying the positions taken by another trader, usually automatically and in real time.

Select a user-friendly platform, find a trader whose style matches yours, and connect your Web3 wallet. And invest your chosen amount. Keep it stress-free, choose your trader meticulously.

Additionally, this type of trading lets you spread your money across different assets, which is a smart way to lower your risks.

It is also a helpful shortcut for people new to trading, as instead of learning all the complicated stuff about trading, you can copy the moves of experienced traders in real-time.

It is often used for short-term strategies like day trading and swing trading, especially in the crypto world.

Where you use copy trading everything happens automatically, so you don’t need to spend a lot of time and effort.

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Is Crypto Copy Trading Profitable?

This kind of crypto copy trading may be profitable, but it very much depends on who you copy and whether that trader has predicted the market movements correctly. Loss may still occur, even when copying the most experienced traders.

In short, copy trading can be immensely profitable. We see a growing popularity in copy trading, which would not be happening if people were losing money. Nevertheless, copy trading — without a proper approach — can cost you dearly.

Whether or not copy trading is profitable mostly depends on the trader you are copying.

If you are following a successful trader with consistent profits and a proven track record, you will likely be successful, whereas you will be likely to lose money when following a social media expert without any hard data proving his accuracy.

Other considerations include the fees you are paying to the trader and the copy trading platform.

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How Can You Start Crypto Copy Trading?

It’s simple to get started with crypto copy trading, just follow the steps:

a. Choose a platform

Whether you are using a single exchange or a dedicated copy trading platform that connects to multiple platforms, this is the place to start.

b. Research traders

Do not just pick the first trader you see, research the available traders to copy on your platform, including looking at their historical performance, and understanding the risk level of their investments.

c. Start small

You don’t have to dive in head first and commit all your funds to one copy trader. Invest a small amount of your overall portfolio, and never more than you are willing to lose.

d. Monitor and re-evaluate

Although a big benefit of crypto copy trading is not having it watch your portfolio constantly, you will still need to monitor the performance of your chosen copy trader, and the wider market, to make sure your strategy is the most profitable it can be.

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Social Trading vs Copy Trading

One of the popular types of copy trading is social trading. In this, you are not automatically copying the trades of other traders, but rather exchange ideas and market research with like-minded peers which can benefit your personal trading performance.

Social trading platforms are a great way to learn more about trading from experienced traders.

You get to understand why they are taking certain trades, how they analyze the market, and how they manage the trades.

However, those benefits come with a large drawback; social trading is not automated. Rather it’s a platform for exchanging knowledge, research, and ideas, but you have to manually open the trades.

a.time-consuming

Social trading is more time-consuming than both copy trading and mirror trading.

b. Education

With social trading, you get to understand why a professional trader takes a trade and what are the exact reasons behind a trade.

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How to Choose a Crypto Copy Trading Platform?

When you are looking for the best crypto copy trading platform, consider these key features;

a. Supported exchanges

Make sure the platform works with your preferred crypto exchange.

b. User-friendly interface

Choose a platform that’s easy to use and navigate, whether you are a trader or investor.

c. Risk management tools

Look for tools like stop-loss and take-profit options to protect your investments, and ensure a secure trading environment.

d. Trade execution speed

Pick a platform that executes traces quickly, especially in the fast-paced crypto market.

e. Security and regulation

Prioritize platforms with strong security measures to safeguard your funds and personal information, and check for regulatory compliance.

f. Customization options

Select a platform that lets you customize your trades, including leverage, stop-loss trade size, and exposure.

g. Customer support

Reliable customer support is essential for addressing any issues or concerns during your copy trading experience.

h. Diverse pool of traders

Look for a platform with a diverse group of traders, increasing your chances of finding one whose style matches your preferences.

i. Transparent performance metrics

The platform should provide clear and transparent performance metrics for traders, including historical returns, success rate, drawdown rate, risk levels, and trading history.

j. Social integration

If it’s a social copy trading platform, ensure it allows you to interact with traders and engage in market discussions for advice from experienced traders.

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How Does Copy Trading Work?

Copy trading is a concept that is applied in all financial markets. You can copy trade a forex, CFDs, or stock trader, or follow a crypto trader along his journey.

There are multiple ways of copy-trading other traders. Most people have copy-traded at least once in their lives, by following experienced traders on Twitter or Discord into a trade.

This way of manual copy trading is available for purchase as well, with many “influencers” acting as paid signal providers, usually in private Discord groups.

In recent years though, manycrypto exchangesand other third-party platforms have started to offer automatic, real-time copy trading services. While originally popularized by eToro, the service has now become mainstream.

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How To Successfully Copy Trade

To copy trade successfully, you need to put in time. Firstly, you need to understand the trading system of the trader you want to copy.

Different trading systems work well in different market environments, so understanding how your trader approaches the market will help you stick to the strategy in times when it is less profitable.

For example, atrend-following systemworks in a trending market and loses money when markets are consolidating.

As markets are trending less than 50% of the time, this means the trading strategy will lose money often. Nevertheless, the profits of catching a trend more than makeup for these losses.

If you did not know about this, odds are you would have already stopped copying the trend-following system before a trend shows up.

But if you did your homework, you would be at ease, waiting for the next trending move to show up.

Another way of increasing your chances of success is by copying multiple successful traders with different trading systems.

After all, diversification makes you less dependent on market conditions.

Finally, it is crucial to exercise risk management. Not only should you make sure that the traders you copy have a solid risk management system, but you should also limit your risk per trade you copy.

For example, you could choose to only allocate 3% of your funds to a certain trader or use a stop loss when the trader goes more than 20% into drawdown.

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What Are Trading Signals?

Trading signals are messages alerting you to potential trading opportunities. Signal providers use various kinds of analysis to bring trades to their followers, sometimes even with a take profit target and stop loss.

Signals are usually not copied automatically, but manually followed by the group members.

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Crypto Copy Trading Platforms

There are many different copy trading platforms available, for different kinds of markets.

PrimeXBT

PrimeXBT is a crypto copy trading platform that also offers stocks, forex, and commodities trading, allowing crypto traders to explore other financial markets.

Bybit

Bybit is acentralized exchange(CEX) that recently launched its copy trading feature.

eToro

A platform for social trading. In addition to copy trading tools, eToro allows for community discussion, which helps traders learn from the traders they copy.

3Commas

A platform forbot trading, offering crypto trading robots that allow you to choose your strategy.

Shrimpy

Shrimpy is a platform that focuses on portfolio rebalancing. In addition to standard copy and social trading tools, Shrimpy has a rebalancing tool that allows you to automatically rebalance your portfolio according to your preferred risk/reward.

Pionex

The free copy trading platform might not be the most advanced of the bunch, but it is one hundred percent free. What else could a degen trader need?

Kryll

Kryll has a drag-and-drop strategy builder. This allows you to create your trading strategy and automate it. It allows users to automate their approach to the markets.

Coinmatics

Coinmatics allows you to choose whether you want to copy automatically, or manually. This flexibility allows you to keep greater control over your risk and makes it one place to get started if you’re not sure about copy trading just yet.

CopyMe

Contrary to many platforms, CopyMe allows you to copy-trade multiple traders at once. Diversification in trading is a known way to minimize your risk.

Gate.io

Gate.io is a CEX that allows copy trading with high leverage, with over 1,400 cryptocurrencies listed on the platform.

MoonXBT

It is known for its incredible speed of execution, according to its team. And, MoonXBT allows you to copy trade low-timeframe scalpers.

WunderTrading

WunderTrading offers a platform for copy trading that supports Binance, FTX, Kraken, Bybit, and many more exchanges.

Zignaly

Zignaly differs from the rest because of its profit-sharing feature. With this tool, you can copy trades and only pay trading fees when profits are made. This minimizes your costs, while maximizing your profits, according to the project.

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Benefits of Crypto Copy Trading?

Copy trading is a form of portfolio management. The goal is to find other investors who have a track record you would like to emulate.

The process of crypto trading allows you to monitor the strategies of other successful traders. Like any trading system you decide to employ, traders are best served by following the investor before they decide to risk real capital.

Chiefly, copy trading is useful for you if you do not have the time to follow the market yourself.

Generally, copy trading is focused on short-term trading, but several different strategies are used to generate revenue.

The assets that are used focus on the foreign exchange market and contracts for difference. While copy trading can be lucrative, there are also risks involved, and you should remember that past results are not a guarantee of future returns.

You can diversify your crypto portfolio by finding copy traders that trade on different financial instruments.

For example, you could copy a forex trader as well as a commodity trader. You could also consider copying traders that use different time frames.

One might be an intra-day trader and another could be a long-term trader.

Lastly, you may consider very active traders compared to less active traders. Remember, however, that if something appears too good to be true, it probably is.

The business model used in copy trading can be lucrative. Most copy trading businesses are subscription models, where an individual pays a fee to copy traders every month.

Additionally, you can use an alternative model that can be used in revenue sharing. In this, you receive a certain percentage of winning trades.

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Risks of Crypto Copy Trading?

a.Market risk

It describes the risk of loss due to changes in the price of a security. The goal is to generate gains from an increase in the value of the asset being traded.

There is a risk that the asset will lose value. But you can protect yourself from market risk beyond what you may expect to lose by using an asset allocation strategy.

This means that only a certain amount of funds are allocated to a certain strategy. By allocating all your assets to a single trade strategy, you could face large losses. If an unexpected event occurs, this could wipe out your entire capital.

Further, a diversification strategy helps you make money in several types of market environments.

b. Liquidity risk

This type of risk means you may not be able to exit positions at expected levels. A strategy’s risk management method should have historical precedence so that you can see the copy trader’s maximum historical drawdown.

The maximum drawdown shows the peak-to-through decline during the life of the strategy.

This is a very important figure as it lets you see historically the maximum amount you may be comfortable losing at any given time if you choose to enter the strategy.

c.Systematic risk

Emerging market currencies are more exposed to systematic risks. This means that one’s money could get locked up and you may not be able to exit your position.

This has happened in the past when countries are overthrown and the capital is locked up and forbidden to leave.

While this scenario is very rare, it needs to be included in a strategy where the situation could happen, especially in the foreign exchange market.

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Copy Trading vs Mirror Trading

There are slight differences between copy trading and mirror trading. The definition of mirror trading is mirroring a trading strategy.

You mimic the trading style or trading strategies of other traders. Initially, traders were interested in specific algorithms that were developed and developers shared their trading history.

Traders would find algorithms with strong returns and then copy their results, asking the developers if they could follow their strategies. Copy trading was born out of mirror trading.

While copy trading, one does not receive the layout of the copy trader’s strategy. Instead, they follow the trader’s blindly.

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Conclusion

Chiefly, copy trading is a portfolio management strategy where you copy the trades of another trader, tracking the performance of their investor.

There is also an automated version of copy trading where your trades are automatically transacted.

A manual version will allow you to execute your trade. It offers discretion, and if you employ your discretion, you should expect the returns to be different relative to the historical returns of the copy trader.

Profits from crypto copy trading will come with a tax bill and especially if you are following an experienced trader, your transactions can add up.

But, you also need to be wary of systematic risk. This is where you copy traders who speculate on emerging market currencies, as they could run the risk of their capital becoming locked up.

Before starting copy trading, you could consider opening a demo account and manually copying the trades to see if the returns are as profitable as had been expected.

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