Copy trading also known as social trading is an automatic way to trade the Forex market by following other top traders. Usually via online platforms, a client can choose which traders he wants to follow and the platform automatically copies the trades of the followed trader.
The best traders are usually listed right on the platform alongside their track record and equity curve. Everyone can see all their trades as they make them so a trader can easily decide who to follow. Social trading benefits both the “copier” and the “copied”. The traders who have a lot of followers receive extra money for being successful traders.
Social trading is a good and easy way for beginners to start trading the Forex market because most of the copy trading platforms don’t require the trader to do anything except select which traders to follow and set the amount of capital he will assign to each of the traders he is following, or in other words set his risk tolerance level.
Social trading platforms don’t just copy trades, but also any action related to it. The platform automatically sets the stop loss, take profit or trailing stop orders just as the copied trader does. It also opens the trade with risk proportional to the trader’s capital.
Unlike some other automated trading methods like using a Forex robot yourself, copy trading is an easier way and can be just as profitable. Some people prefer this way of trading because they would rather trust another human being than trust a plain digital machine to trade their invested capital.
Mirror trading is similar to copy trading, the difference is in that, instead of following a human trader the client follows a trading strategy offered by the broker. So this would be similar to using a robot because the strategy is automatic and executes trades on pre-programmed criteria.
On mirror trading platforms the strategies that are offered are developed by experienced traders, so the client has an option to choose from a vast number of successful trading strategies to trade his account.
The platform automatically sets stop losses and profit targets with the desired risk that the client specified. The client can also set the platform to always place a stop loss even if according to the strategy there shouldn’t be one.
Like with everything, understanding the matter helps a lot and the trader will certainly benefit more if he understands the Forex market well before using copy or mirror trading services. Experienced traders are not infallible and their strategies will have periods of drawdowns.