Ever since the rise of digital assets, members of the crypto community have demonstrated incredible ingenuity when it comes to the speed and efficiency by which they come up with new ways to enhance their profits and asset management techniques.
True enough, the world of crypto is powered by its communities and open source coding, and it has been proven time and time again that new approaches can get implemented considerably faster and with more success than with any other form of profit making. One such novel approach is crypto copy trading, which has also shown great effectiveness in a relatively short period of time.
Even if you’re new to trading in cryptocurrency, you’re probably aware that trading, in general, takes a lot of effort and research before you can see profitable outcomes. Thankfully, many of the most significant innovations have been in precisely this area, with new automation tools and platforms popping up all the time, making crypto copy trading an easy way to get yourself started.
What is Copy Trade?
Simply put, crypto copy trading is the process of directly copying another trader’s positions. The user chooses the amount of crypto they wish to invest, selects a trader who has had successful trading outcomes, and then they simply replicate their trading orders.
The process takes place in real time: when the chosen trader executes a transaction, the user copying their trading techniques executes the identical order. The user doesn’t have to intervene manually at all, and they end up earning the same rewards as the selected trader(s) on each of their trades.
It is important to note that, although the process is automatic, the user always maintains control over their outcomes. They can continue to close trades and open new ones as much as and whenever they want. Eventually, by replicating a professional trader’s strategies, the user could greatly profit from their expertise.
How Does Crypto Copy Trading Work?
While the exact mechanisms of copy trading will vary depending on the platform you use, there are some core functionalities that are more or less always the same.
To get started, all you need to do is connect your exchange account to the copy trading platform. You will then be able to browse through a list of traders to see which of them suit your trading objectives, e.g. the type of investments they make and which digital assets they trade in. Normally, your best bet would be traders who already have a lot of followers, as that is usually an indication of a history of successful trading outcomes.
After you select the trader(s) you wish to mimic, everything that follows becomes automated: once a trader executes a trading order (such as buying or selling), your account will replicate it, and if the trader’s strategy generates profit for their account, your account will benefit from the same.
As an illustration, let’s say you’re copying another professional trader’s positions, and they decide to buy some Cardano coins. Once they execute this order, your account will receive a ‘signal’ which will make the copy trading tool perform the same transaction. The tool will also mimic the trader’s decision to sell their coins at a high price, and it will also do the same if the trader purchases certain coins when their price declines, keeping in mind that the trader anticipates their price to rise in the future.
Copy trading is one of the simplest methods to get your foot in the door when it comes to trading, as you don’t need any advanced market knowledge apart from being able to carefully select the traders that you wish to copy positions from.
Advantages of Crypto Copy Trade
As with any automation tool, the advantages of crypto copy trading platforms are in the fact that they are convenient for beginner traders, because they earn while learning. If you’re just starting out in the crypto market, copy trading is the perfect way to understand how things work and avoid the pitfalls associated with a steep learning curve.
Crypto copy trading also offers the best way to earn passive income. With full automation, copy trading frees up traders’ time to focus on other activities, while giving them the peace of mind that experts are handling their trading activities. It’s also suitable for seasoned traders who don’t have the time to monitor the markets continuously in order to identify possible entries or exits.
Another upside is that you can easily control your losses. If the results don’t meet your expectations, it’s easy to stop copying the trades of the trader in question and switch to more successful ones.
Takeaway
For newbie traders who want to get themselves started in the trading game, but also experienced traders who are capable of analyzing complex trading strategies but do not want to go through the hassle of manually executing them through exchanges, crypto copy trading might be a great option.
When it comes to copying trading methods, though, it’s essential to be cautious: when a significant number of individuals rely on the same one, its efficacy might suffer.
Be smart about the traders whose orders you choose to mimic and don’t adopt a total hands-off approach; with proper risk management, you will definitely be able to reap all the benefits of copy trading.
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