By carefully copying the trades of a successful crypto investor, you can derive significant profits from somebody else’s expertise and experience. Through crypto copy trading, you can build a track record of success that results in more successful trading.
As the saying goes, success helps breed more success. Sadly, the opposite is also true, which is a major reason why many crypto investors have lost a lot of money during the persistent crypto winter, stuck with stacks of depreciating cryptos.
Most traders have found alternative investment strategies, from dollar-cost averaging and HODLing to margin trading. But, it is a fact that most of those investors who entered the crypto market during its peak in November 2021 are still counting their losses.
But, what if there was a way to find successful trading strategies and then use them to your advantage? Would you believe that you can find success in crypto trading without having to deal with complicated trading algorithms and tedious research?
Crypto copy trading has come as a great solution and it is gaining popularity among traders and investors.
What Is Crypto Copy Trading?
It is described as a process where a crypto investor copies the trades of an expert trader. By copying these trades of a successful and experienced investor, you can derive profits from somebody else’s experience and expertise, developing a track record of success that results in more successful trading.
What is involved in the real process of crypto copy trading? Being a crypto investor, you can copy trades of experienced investors automatically by renting their trading bots. Expert crypto traders use automated trading methods like crypto trading bots to enhance speed and efficiency.
These trading bots also eliminate emotions from the trading process and help in risk management and diversification. They also have the ability to test and optimize their strategies using historical data.
Hence, as an investor when you rent a trading bot made by an expert trader, you effectively copy their trading strategy. Since everything is automated when using these bots, the whole process saves you time and effort and boosts the possibility of a positive return on your investment.
This description from an academic research paper provides a clear and concise description of the general copy trading process:
“This feature enables investors to replicate – in real-time and in their own accounts – the actual trades of other investors. An investor is allowed to follow other traders for a fee and have the platform automatically execute the trades of other traders on her own account in a real-time manner.”
Nonetheless, the more you study copy trading the more you note that it sounds similar to mirror trading and social trading. But, crypto copy trading has come to help beginners take profits home from trading the markets.
Benefits of Copy Trading Crypto
As is the case with everything in life, there are pros and cons to consider when using crypto copy trading, ones that you must always remember as an investor when choosing a trading bot for this process on a crypto copy trading platform.
- Increased efficiency since every executed trade is observable
- Enhanced control over trade executions by individual traders
- Lower fees
- Simplified crypto investment processes
- A lot of flexibility
- Minimal or no exposure to unscrupulous financial advising services and advisors who mostly have hidden agendas.
Shortcomings Associated With Copy Trading In Crypto
You should know by now that copy trading has many benefits and can mostly be one of the best solutions for most traders. But, you need to be aware of some possible drawbacks. They include:
- Lack of adequate information about the crypto copy trading strategy
- Unexpected crypto volatility which affects copy trading strategies
- Fees can eat a huge chunk of your profits if many trades are executed simultaneously
Crypto copy trading can be profitable if you follow expert traders with winning track records. Copy trading is gaining popularity among investors which proves that they are making money from it.
But, there are some factors to remember when you consider copy trading and profitability. Just as businesses strive to know their customers, so should you also due background checks when choosing a reputable trading platform. Crypto copy trading should just be done via a trusted source that is recognized and licensed by authorities.
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