Nowadays, one of the easiest ways for beginners to enter the trading market is to copy the trades of a successful trader. There are numerous platforms that allow you to do exactly that. The problem is that this possibility also comes with a negative aspect. When you select traders, you can end up choosing one that is not actually a very good one. This is why whenever you are interested in Ctrader copy, you need to consider these very simple tips:
- Only hire those traders that have a 100% proven track record. You need to see at least 1 year of social trading. The longer the trader was active and presents documented trades, the better! Thanks to this you can easily evaluate the trader’s performance in regards to trades done in varying market conditions, like bear and bull markets.
- Obviously, you want to be sure that the delivered results are consistent. For instance, the trader that delivers 3% every single month and has been doing so for around 1 year is more consistent and better than someone that returns 6 months in the positive at 10% but then ends up losing during the following months at 7%. Historical performance graphs can be analyzed with social copy trading so make sure that you see the consistency that is demonstrated through a graph that keeps increasing. If you see irregular spikes, it is a sign that the trader is not consistent.
- A great way to assess the popularity and respect associated with the trader is to see how many copy his/her trades. If you see that there are many copying, it is a clear sign that something great happens. Social trading networks give you access to the possibility of benefiting from the work of other investors. However, this should not be the only factor that is taken into account.
- Try to find out what money is used by the trader. Does he/she use personal funds or is the trader financed by a third party?
- Analyze the trading strategy of the trader and make sure that you read the profile description. Do you see that there is a clear strategy presented? Are you following a trading firm or an individual? Do you clearly know when the trader takes advantage of some automated signals or when manual trading is done? All of these questions give you answers about what strategy is used.
- Whenever automated strategies or systems are used, identify if the trader monitors the system with the purpose of making manual interventions or not. There is no automated trading system out there that is perfect. Also, these systems rely on historical data, which is not fully reliable.
- You have to analyze the trades’ winning percentages. If you see a percentage that is higher than 85, it means the trader most likely uses high-risk trades. This is usually done by holding on to the positions that are losing until they become positive.
To sum up, copying a trader is a great way to make some extra money but it is not bulletproof. You need to use due diligence and choose just those traders that are proven to be really good.