Copy Trading: Choosing the Right Service for Your Trading Objectives

Copy trading has become increasingly popular in recent years, emerging as an important alternative investment in its own right. As a result, many brokers now offer their own “copy trader” systems or allow their clients to connect to third party providers. Choosing the right service is crucial in meeting your trading objectives.

Look for Good Signal Providers, Not Features

All the bells and whistles of a copy trading platform would mean nothing if they fail to offer really good signal providers to copy traders. Features like having a personal account manager, whom you can call in the middle of the night, are useless when your signal provider decides to remove the stop loss on the GBB/USD before Brexit!

Without well-performing signal providers, even the best copy trading platform is useless, right? Hence, when you are researching to find the best copy trading platform, instead of looking for a ton of great features, pay more attention to the actual statistics of traders who will be providing signals for your copy trading account.

Look for traders with a proven track record of at least 12 months on the social trading network. The longer, the better, as this allows you to evaluate the performance of the trader during different market conditions (bull and bear markets).

Also, choose and understand the best social trading platform for you. There are several platforms available for you to choose from, and each has its pros and cons and its unique features.

Look for a Platform That Provides Ample Statistics About Signal Providers

There are a lot of good copy trading platforms that offer great service but fail to display key statistics about their signal providers. Regardless of how many great signal providers a copy trading platform may have, unless they offer investors the tools to easily find and compare the performance of the signal providers, it would be very difficult to find those good signal providers.

For example, a lot of Forex brokers have decided to offer copy trading services in-house via third-party software platforms. While these copy trading platforms offer adequate features to find traders and make it very easy to copy them, they fail to provide enough details and various key metrics about their traders.

It is also important that you learn how to properly manage risks and the right way of allocating your capital. You should always know that as the number of traders you choose increases, so does the number of trades the system will be making on your behalf. One often overlooked mistake of traders who are new to copy trading is that they do not have enough capital in place to match the amount used by the traders they follow.

Look up a trader before you copy them, as this will give you an idea of how many trades they have open at any given time.

Look for Good Customer Support

When we say good customer support, it doesn’t mean finding a company that is too eager to (appearing to) help you. Some of these companies, who may try to show that they are always available to help, will often disappear when you actually need help resolving any issue with your account.

Unfortunately, finding help when you need is rare in the Forex industry. So, as a rule, always test the customer support with a small deposit in your account. If they treat you right as an “insignificant customer,” then there’s a good chance that they would be helpful when you have a large deposit in your copy trading account as well.

Look at how frequently the trader communicates with their followers and what they say. A trader who frequently keeps you up-to-date with their strategy and market views is more likely to be following the markets closely and will be able to react and adjust their strategy when new market conditions occur.

Featured photo credit: Ayala Stock Trading Room via flickr.com.