Copy Trader: Trading like the best performing traders on the platforms
One of the eToro platform’s most popular option is Copy Trading, which allows you to trade like the best performing users by automatically replicating their positions and monitoring their actions in real time. This feature is new on the market and gives investors a chance to save on time, education and effort while combining, balancing and watching their portfolio themselves.
(NOTE: Before we continue, we have to give a disclaimer that the trading products offered by the companies listed on this website carry a high level of risk and can result in the loss of all your funds. CFDs are complicated instruments that are never guaranteed to provide you supplemental earnings. In fact, Around 68% of all retail investors experienced a loss while trading CFDs. Make sure to keep this in mind before attempting to use the eToro platform yourself. All the information found on this website is not official trading advice and all practices shown are referenced for the use of the Demo account only.)
Choosing a Trader to Copy
There are quite a few criteria you might consider when choosing on who to copy. It is certainly a very personal choice, but there are a few things one might consider nonetheless.
- Selection of Assets. Many traders focus on assets from a specific industry, such as the tech or automobile sector, whereas other combine a well diversified portfolio from multiple industries and different assets. The choice then depends on your own personal preference and outlook on the question of diverisification.
- Investment horizon. Some traders prefer assets more suitable for short term gains, which also tend to entail a higher degree of risk and their investment horizon is relatively short. If you are looking for a more long term investment with lower risks but also potentially lower returns you may choose a trader with less volatile assets than for example, risky stocks or cryptoassets.
- Trading statistics. eToro itself by default enforces a maximum risk rating an investor has to maintain to be allowed to be copied by others. However, this still does not necessarily protect your funds as an investor’s trading history is not taken into account before they can become a Popular Investor. Carefully analyzing a trader’s trading history, statistics and portfolio composition and of course returns over the time period is a good way to secure your funds when copying someone else’s trades. There is likewise a tier attached to each investor depending on their trading successes and time spent on the platform and investors in higher tiers have demonstrated successful statistics for a longer time period.
- Steadiness of results. It is a good idea to look at how stable a trader’s returns are. Great fluctuations from period to period may be indicative of lack of a coherent strategy and tactics.
The platform itself provides a selection of well performing traders whose results are impressive enough for them to be promoted on eToro. You can filter the selection as to your preference, as on the image below.
Once you decide on who to copy and choose on the amount, the trades of the trader will be replicated on your own portfolio.
There are quite a few benefits associated with copying someone else’s trading portfolio. You can save on time and effort to create your own portfolio, monitor the positions and constantly rebalance. Another positive aspect is no management costs associated with copying someone else; there are likewise no other hidden costs.
Furthermore, once you decide to copy someone you join an interactive supportive community of traders. Everyone is welcome to share any useful information with others, comment and connect, discuss key news, learning ideas and strategies. Every trader had a chance to look at other users’ portfolio compositions as well as their statistics, trading history, risk ranking and so on.
A Note of Caution
Copying a trader is definetely a great option for some traders who do not have the time and/or knowledge to trade themselves. However, copying another investor does not necessarily guarante the promised returns. You still need to understand the underlying workings of a market and trading basics to assess the performance of the trader you are copying and to know when to exit if you believe their investment choices are no more benefitial.
Hopefully this article provided you with some tips on how to choose a trader to copy and you are now more informed on the feature of Copy Trading on the platform. Best of luck and enjoy trading!
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eToro is a multi-asset platform that offers both investing in stocks and crypto assets, as well as trading CFDs.
Please note that CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 68% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.
Past performance is not an indication of future results. Trading history presented is less than 5 complete years and may not suffice as basis for investment decision.
Copy trading is a portfolio management service, provided by eToro (Europe) Ltd., which is authorized and regulated by the Cyprus Securities and Exchange Commission.
Cryptoasset investing is unregulated in some EU countries and the UK. No consumer protection. Your capital is at risk.
eToro USA LLC does not offer CFDs and makes no representation and assumes no liability as to the accuracy or completeness of the content of this publication, which has been prepared by our partner utilizing publicly available non-entity-specific information about eToro.
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