Everybody seems to be trading and investing in cryptocurrencies, and some are becoming wealthy. However, buying and trading cryptocurrency requires much knowledge and experience. Thankfully, this does not mean you must miss out.
If you’re new to the crypto industry and have not yet established a profitable trading strategy and grasped the markets, copy trading will enable you to make big wins. But what is copy trading? This article will help you get the fundamentals of crypto copy trading.
What is Crypto Copy Trading
Crypto copy trading is an innovative idea that enables anybody to mimic the actual transactions of established cryptocurrency investors on autopilot, automating the whole crypto trading process.
Traditional cryptocurrency trading requires extensive market and chart analysis and research to support trading choices. Furthermore, you are responsible for managing the deal and exiting at the optimal moment after initiating a buy or sell order. However, with copy trading, newbies find a way of profiting from crypto without doing anything. To copy trade, choose a trader from one of the crypto copy trading platforms, synchronize your brokerage account, and let technology do the remaining work.
What is the Benefit of Crypto Copy Trading
Investing in cryptocurrencies needs several hours of work and study. You must know how to identify “hidden jewels” and trading possibilities and handle each trade, which requires much more time and emotional management. Copy trading in crypto removes the necessity for all of this labor. It enables anybody, irrespective of skill or expertise, to earn from crypto market investments without spending time.
Very Friendly to Newbies
Is copy trading worthwhile? This question is often one of the most frequently asked when discussing copy trading. The second consideration is if it is “beginner-friendly.” Each of these questions has a resounding affirmative response. Even though the earnings you may get with crypto copy trading mostly rely on the trader or company whose transactions you choose to mimic, copy trading is very beginner-friendly. You are not required to analyze, research, or even trade. The only effort one has to make is to find the right trader making good profits. You will also have to periodically review the trader to confirm their performance over time. Copy trading makes investing in cryptocurrency simpler than ever.
More or Less an Automatic Process
When copy trading with any of the platforms, everything is performed automatically. It is an entirely hands-off method of trading that enables you to profit from the crypto space with less involvement. You only have to observe the copied techniques and make necessary modifications to reduce losses and increase earnings. Compared to the effort done by the everyday trader — complex analysis and frequent market monitoring – crypto copy trading does not have much work into it.
Can You Consider Copy Trading to be Profitable?
In copy trading, the results of your trade depending on the performance of the trader you follow. If you follow a trader with a track record of great profits in their trade, you are guaranteed to have better earnings. The vice versa is also true. However, there are risks you will face as a copy trader. Some of them are mentioned below.
Market Risk
Market risk is perhaps the most known risk for copy traders. For every live trade, there are a variety of market forces leading to the making or breaking of the trade. These factors include exchange rate risks, changing commodity prices, varying interest rates, and equity. However, you should not confuse market risks and bad trading skills.
Liquidity Risk
Liquidity risk is the risk that a copy trader cannot close a trade at a given price within a specific time. For example, if there is no buyer in the market, you cannot sell, and when there is no seller, you cannot buy. This risk is most common within exotic currency pairs, low cap stocks, or exotic crypto coins.
Systematic Risk
Systematic risk is one of the risks that can negatively affect your trade in a major way. The main problem with systematic risk is that it cannot be cut down through trade diversification since it is inherent to the market. Some of the events that are almost impossible to predict in a market can cause significant damage to a copy trader’s account.