To be able to use Copy Trading, you need a few necessary components. In different situations, the components may differ, but in general - Copy Trading always consists of several elements:

The market, that is, the stock exchange

When using financial instruments, it is obvious that we have access to them through the stock exchange. It can be the CFD market as well as the Forex exchange. The main and primary market where the idea of ​​copying transactions was born is the Forex exchange (currency exchange).

As CFDs became more popular, copying traders became available on virtually all instruments. You can do it on:

► Shares

► Indexes

► Goods

► Currencies

► ETFs

► Cryptocurrencies such as BitCoin

Broker

Another fundamental element is the Broker. We cannot invest without it and therefore use the Copy Trading facilities. In the basic copy trading model, we need a broker with whom we open an investment account. We assign a copier of stock exchange transactions (forex or CFD) to the account and use it to track investors.

On the Internet, we can also find Forex brokers who provide the ability to copy transactions on their own platform. In this case, we only open a broker account. There is no need to have an additional account and transaction copier as a separate application. Below you will find a detailed description of how it works.

Trader as a provider of stock signals for copying

Such a trader is a person whom we decide to follow and copy all his stock exchange transactions. Of course, such a user should be well selected by us. Each copier and platform with this option gives us the opportunity to view various statistics and financial results of a given person.

There are several models. some platforms require a confirmed investment strategy, while others provide the sales results of a given exchange signal provider. In this case, we can view them ourselves and choose the best investor for us.

The ability to view traders' statistics is a key element of the entire process.

Trader as a copying investor

This is, of course, your role. Copy Trading is an investment process that can be performed in various ways. Each copying investor has his own preferences and a different risk appetite. Your role is to make the most appropriate decisions in terms of profit and investment risk.

Transaction copier

The final piece of the puzzle is the Forex copying platform. Without it, the whole process would not be possible. In the past, when such applications were not available, traders used more basic tools. These were mailing lists, forums and chat rooms. Such methods were used to share information on the most lucrative transactions in the future.

As we are about to find out, there are many types of copiers for stock transactions on the Internet. Each of them has different advantages and disadvantages. You should choose yours as expected.

There are two basic models of copiers on the market:

► Copiers (platforms, brokers) that allow you to track investors within your own platform. Here we do not have to make complicated configurations and install (open accounts) in additional transaction companies.

► Copiers that exist as separate tools. They interact with many brokers on the market. They allow you to copy transactions with a broker other than ours. They are separate computer programs.

Did you know that you can… now?

Copy Trading is a form of investment. Like any investment, this one also involves risk. Anyone who writes or claims otherwise is either lying or acting in bad faith.

Here are some of the risks you'll be exposed to:

Lack of knowledge about the operation of the platform or copier

We will quote a story here that really happened to an investor. Well, instead of taking the time to learn how the copier works, the investor started the transaction right away. The problem was that this person was not experienced enough to set the program to 10 micro lots. He started his social trading by investing 10 lots. When he realized it, it was too late.

Not being aware of the copied trader's strategy

Certainly, you have seen several investors generating cosmic results more than once. A perfect growth line, a great profit of 100%, systematic payouts almost every day.

Let me address this right away - such strategies do not exist. It is a ready method for failure.

In the short term, we can actually see investors delivering these results. However, there is no such person in the world who is able to generate such profits in the medium or long term. Sooner or later you will lose all your money investing with the help of such a man.

No knowledge of how much to invest in a given trader

From the very beginning, you need to know how much money you want to spend on one Trader. You need to make a decision based on optimal risk, minimizing losses and maximizing profits. Otherwise, by "entrusting" such a person with too much money, you may lose it.

Not controlling your wallet

Copy Trading is not about setting up your system once and forgetting it. Of course, this is not a full-time job, but you should follow investors' actions and react appropriately when any threats arise.

Investing by copying the best investors means being a cash supplier.

The money is yours and you manage it.

It depends on you how and in whom you invest your funds. You have to decide what kind of risk you are willing to enter. Your biggest choice will be deciding which investor or investors you want to copy, but not only!

Many novice traders think that everything will depend on the investor you invest in. On the one hand, this is true, but not entirely.

Consider the example below. The provider of our trading signals has an account with €100,000. You only have funds of EUR 1,000 at your disposal. If you don't set up the copier properly, there is a good chance that you will lose money very quickly.

To best prepare for this process, you should also ask yourself the following questions:

► Have you defined your investment goals?

► Have you diagnosed the risk?

► Have you analyzed this risk?

► Did you carefully search for traders to copy?

► Is the copier well programmed?

► Are you happy with your strategy?

In Copy Trading, a signal provider is often presented as an asset. Therefore, we can find it most often in the "Investment portfolio" or similar tab. Each investor we want to copy has its own characteristics and financial results. However, there are common features on the basis of which we can and categorize. The first one is the technique that the investor uses when making decisions.

► An investor using fundamental analysis

► An investor using stock market indicators

► An investor using only the price of the asset

In most cases, every investor specializes in one of these techniques, but understands the other two perfectly well.

They can also be grouped in terms of the time horizon of their investments:

► Long-term trader (months or years)

► Medium-term trader (weeks)

► Daily trading (hours or days)

► Scalping (seconds/minutes)

When making a decision about choosing a Trader to copy, you should also take into account other factors. Among them we distinguish such as:

► How long has a Trader (signal provider) been playing the stock market?

► How many assets does he use?

► How many open positions does it have at any one time?

► How many transactions are performed on average (daily, weekly, monthly)?

► How long does he hold an open position?

► What are his profit statistics?

► What is the risk index?

As mentioned before, there are two types of copiers on the market. The first is investment platforms that allow you to track selected investors within their own software. In this section, we will now describe the process of copying traders using the example of an application that functions as a separate program. We describe the operation of the copier built into the broker in the second part of the entire article.

The transaction copier has two main roles by definition:

► It acts as an intermediary between the signal provider (the trader we want to copy) and the Investor who will follow the above-mentioned person.

► It secures the copying process in terms of technology. Thanks to it, all activities are performed automatically. It also scales the deal size.

Let's imagine a situation where we have 1,000 EUR in our account, but we want to follow a Trader whose investments are 100,000 EUR. A transaction of 1% of his capital will be for our entire deposit. Of course, we cannot afford such a move. In case of failure, we will lose all money.

It is for this reason that we need to copy trades proportionally. The copier takes care of this automatically. It's up to you to configure it carefully.

How does it work in practice?

► When an investor we follow opens a position, his Broker sends a signal to the copier.

► The copier receives information about a new transaction.

► The copier verifies the state of our account and compares it with the system settings.

► The copier sends a signal to our broker to open a new trade. It will be appropriately modified so that it corresponds to the amount of our investment capital.

► The broker accepts the order and trades on our behalf.