What Is Crypto Copy Trading

1 year ago · Updated 1 year ago

✍️ 28 March, 2023 - 5:13 👤 Editor: Jakub Motyka

A crypto copy trading practice means copying strategies of skilled traders.
Below we look at the advantages and disadvantages.

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Crypto copy trading is a practice where an amateur trader copies the trading strategy of an experienced one. The trading of digital assets requires professional skills that take time to develop. It involves studying charts (technical analysis) and researching the market trends (fundamental analysis).

How Does Crypto Copy Trading Works

There are copy trading software tools available in the market that let amateurs copy the strategies of experienced professional traders. Using the software, one can buy and sell digital assets without putting much effort and time into the technical and fundamental aspects. The process starts with identifying a pro trader with outstanding strategy and getting the right software.

Copy trading software is automated, executing the same step the skilled trader takes. For instance, if the expert spends $300 on Bitcoin, the software will also spend $300 on BTC. However, users have the option to overrule the decisions of the software any time.

How To Identify Skilled Copy Trading

An expert trader can be identified by looking at their performance from the trades they have done in the past. The effectiveness of copy trading heavily depends on the skills of the copied trader. Some metrics to check include the number of followers of the copied trader, the number of funds they manage, and their risk levels.

Information about the track record of a such a trader is available on the copy trading software. On such platforms, the traders willingly share their dashboards with their followers. Some of the software available include Bybit copy trading, eToro, and Zignaly. It is important that traders exercise caution when choosing their preferred platform.

Alternatives To Copy Trading, Pros, And Cons

Cryptocurrency social trading is the alternative to copy trading, allowing traders to join trading group on social media platforms like LinkedIn or investment platforms such as Robinhood. The groups are managed by experienced and successful traders who suggest to the rest of the members trades.

One disadvantage of copy trading is that you lose control of your decision-making. In addition, since there is a time difference between when the expert trader makes a move and when the amateur does, any market volatility could mean losses. The risk tolerance between the amateur and the skilled trader varies – something that can also be misleading.

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Jared Kirui

EN: Jared Kirui is an experienced financial writer with a passion for all things blockchain technology. Previously, he was into stock markets and forex, providing asset managers with top-notch content. With a flair for producing high-quality articles, he started covering crypto news in 2021. He is open-minded, trades for fun, and enjoys sports.

ES: Jared Kirui es un escritor financiero experimentado apasionado por todo lo relacionado con la tecnología blockchain. Anteriormente, estuvo en los mercados bursátiles y forex, brindando a los administradores de activos contenido de primer nivel. Con un don para producir artículos de alta calidad, comenzó a cubrir noticias crypto en 2021. Tiene una mente abierta, comercia por diversión y disfruta de los deportes.