What is Copy Trading and How It Works? – 2024 Guide

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There is no doubt that almost everyone has heard about Bitcoin and altcoins since it is a hot topic. And the cryptocurrency market, with a massive number of coins traded on exchanges, offers fantastic opportunities to make money.

However, investing in cryptocurrencies can be a complicated, risky, and time-consuming activity, especially for beginners who don’t have sufficient knowledge and experience in trading. Then how to get started?

There is a way of investing which attracts hundreds of professional traders and novice investors — copy trading.

What is Copy Trading?

On the Internet, you can find such concepts as social trading, mirror trading, copy trading. In general, they refer to the same idea — copying the trades. But social trading includes a social element, which means users can interact with each other via blogs, chats, channels on a platform, etc.

The idea of copy trading is simple: you just copy the deals of other traders. All the actions made by a trader will be copied to your exchange account.

This type of investment is a good option for non-professional traders who do not have deep knowledge of the cryptocurrency market but consider copying crypto trades as an option to make money.

Copy-trading allows people to learn and earn in a real-time and environment, receive passive income, and study how professional traders do their business.

What is the benefit for professional traders? They receive additional income by providing their knowledge, and even with great experience, they can always learn something new from other traders.

There are two modes of copy trading: automatic and manual.

1. Automatic mode means that deals from one account are automatically copied to another. Copy-trading platforms provide such functionality.

2. Manual mode involves getting crypto signals from professional traders and putting the order on the exchange manually. The signals can be found in social networks, channels, forums, and also it can be a part of copy trading platforms.

Why Is Copy Trading a Useful Tool for Traders?

Copy-trading has advantages for both novice traders and experienced ones.

• Educational tool

Beginners can learn the crypto market by following experienced traders, analyzing their trading strategies, and learning how to trade in their way. As the saying goes, it is never too late to learn. Even traders with many years of experience can find something useful in following other traders. And the more subscribers to the trading strategy, the more responsibility to them, since they trust the trader’s expertise.

• An easy entry into the financial market

You are not required to have special skills or trading experience to start copying trades. However, you will begin to acquire knowledge during the process.

• Time saver

Some traders choose copy trading just because they don’t have enough time for trading or analyzing the market. And beginners, if they copy the trades automatically, have more time for studying the market.

• Passive income

Copy-trading can become a source of passive income. But don’t forget that the cryptocurrency market is very volatile, so you should track the results and adjust your subscriptions if necessary.

• Diversification

You can manage risks by mixing a variety of different trading strategies.

But you shouldn’t forget that trading is risky by its nature, and crypto trading is even riskier because of the volatile nature of crypto assets.

Where And How to Start Copy Trading?

The first way is to copy traders’ deals yourself by observing traders in social networks, channels, blogs/vlogs. But this option can be complicated, and you should manually put traders’ orders on your exchange account. And the quality of such signals can be checked only by trial and error.

The second way is to use special platforms that feature copy trading functionality. The financial market is rich in them, and the number is constantly growing. The important thing is to choose the one that suits you best. Despite their number and variety, all such platforms refer to one idea — to provide an environment for trading or analyzing.

Such platforms will help you avoid many mistakes and get profit by repeating the trades of trading experts. You just need to connect an exchange account to a platform, choose the trader that best suits you, follow his strategy, and then check your financial performance on the account and change the subscription if necessary.

Let’s look at one of such copy trading platforms — Coinmatics — and see how it works.

You should use a copy trading software and analytics platform based on a mutually beneficial partnership of professional traders and novices.

It means that novice traders can copy crypto trades of professional traders on the platform, and the latter, in turn, receive additional income from subscriptions to their trading strategies.

Key points

• The platform offers both copy trading functionality and analytical tools.
• It supports two exchanges — Binance and OKEx.
• The platform has Spot and Futures strategies to copy.
• Automatic and manual modes are available for copy trading.

How to start?

First, you create an account on the platform, connect your Binance or OKEx account by adding an API key.

If you are a professional trader, you submit your trading strategy and set a commission for the copy trading and Telegram signals. Then, the platform does a preliminary moderation that can take some time. And once your strategy is approved, it will go into the sandbox for 30 days. After it, your strategy goes public. So, a trader continues his trading on the exchange and earns extra income from his subscribers.

If you are a copy trader, after registration and connecting an exchange account, you choose the best strategy to follow and start copy trading (automatic mode) or getting Telegram signals (manual mode).

Before subscribing to any strategy, copy traders can evaluate it using credible statistics: trading period, signals history, total profit, risk level, asset allocation. All this information is open and can help make a well-considered decision about subscribing to a particular strategy.

Conclusion

In conclusion, every investment involves risks, and copy trading isn’t an exception. But it can help to enter into the crypto market easier and avoid many mistakes. Choose reliable and secure tools for your needs.