What Is Copy Trading?
In the realm of financial markets, copy trading allows for the replication of positions executed by experienced traders onto the accounts of other investors. This approach differs from mirror trading in that the copied trader’s funds are partially transferred to the account of the copying investor.
The copy trading strategy involves two parties: the trader whose positions are being replicated, and the investor who is executing the copied trades.
- Copied Trader: As a copied trader, otherwise known as a signal provider, you are an experienced trader whose positions are being replicated by other investors through the practice of copy trading. In order to ensure the quality of the signals being provided, brokers carefully select signal providers based on stringent quality control criteria and publicly monitor their performance. As a signal provider, you are expected to meet certain criteria in order to qualify for this role and your progress will be closely monitored by the broker with whom you are affiliated.
- Copying Trader: As a copying trader, you have the opportunity to replicate the trades of a signal provider, who is typically more experienced and has a demonstrated track record of profitability. This approach can be particularly beneficial for less experienced traders seeking to leverage the knowledge and expertise of more seasoned professionals. While replicating the actions of the signal provider, you are still able to customise your own parameters and limits on copy trading strategies to align with your individual risk tolerance and investment objectives.
Any trading moves the copied trader makes, the copying trader can duplicate. Examples of these actions include stop-loss orders, take-profit orders, closing or opening a position, and similar decisions. Copying traders retain the ability to disconnect from the copied trader and manage their own trades themselves, while copied investors are usually compensated through subscription fees paid by the copying investors. Sometimes, that cost is covered by the broker, which means that copying traders can access this service for free.
Copy trading has led to the development of social trading investment portfolios, sometimes called signal portfolios or people-based portfolios. In a people-based portfolio, investment funds are invested not only in traditional market-based instruments but in other investors, too. As social trading continues to evolve, people-based portfolios will become more widespread throughout the industry.
What Is The Best Copy Trading Platform In Australia?
When attempting to find the best copy trading platform for your trading needs, consider the following features first:
- Regulation: Always ensure that the broker you choose is regulated by a reputable governmental organisation in Australia, such as the Australian Securities and Investments Commission (ASIC), which is a regulatory body that oversees the operation of financial markets in Australia and ensures that companies comply with the law and act in the best interests of their clients.
- Trading Platform: Know whether you will be using proprietary copy trading software from the broker or a platform such as DupliTrade or Myfxbook. Whether a signal service is proprietary or third-party can have an impact on the fees you pay.
- Quality Traders To Copy: A broker should have a number of high-quality traders available for copying. You should be able to choose from a wide range of traders with proven success records, publicised data to back up their experience, and different skills and qualities.
- Flexibility In Parameters: You should be able to set your parameters for copy trading, as you may only want to copy certain actions and orders from the signal providers you follow. Being able to set your own restrictions and permissions on copy trading provides important flexibility and customisation.
- Binding Period: If you don’t want to copy trade, you shouldn’t have to. If the broker you choose attempts to bind you to a copy trading provider, that institution might not be a good choice. Copy trading should always be optional.
- Fees: Subscription, flat, and profit-based fees are all common with copy trading. You want a broker that is fair with their fees, not charging exorbitant amounts that eat into your profits.
With those features in mind, there are two brokers that stand out when it comes to copy trading in Australia, eToro and ZuluTrade.
eToro
Highlight: User-friendly interface
eToro is a social trading platform that allows investors to copy the trades of professional traders. One of the main highlights of eToro is its user-friendly interface and vast selection of educational resources, making it easy for investors to learn about the markets and make informed trades. eToro offers its users a wide range of markets to trade in, including stocks, forex and cryptocurrencies, giving investors the flexibility to diversify their portfolios. Additionally, eToro emphasises its social aspect, whereby traders have the ability to share and learn from each other’s experiences and strategies. This helps investors to stay informed about the latest market trends and to identify new trading opportunities.
ZuluTrade
Highlight: Robust Risk Management System
ZuluTrade has gained immense popularity in Australia, due to its capabilities in allowing traders to follow and copy the trades of investors and professionals within the market. One of the main reasons why ZuluTrade is considered the best copy trading platform is because of its robust risk management systems in place. This allows investors to set custom risk parameters for each trader they copy, giving them the ability to manage their portfolio according to their risk tolerance and financial goals. Furthermore, ZuluTrade offers a wide selection of options for investors to copy traders, such as the option to copy a specific trade or to copy a trader’s entire portfolio. This gives investors the opportunity to have more control over their investments and to align their investments with their financial appetite.
What Is The Best Forex Copy Trading Platform?
When it comes to forex copy trading, two of the best platforms in Australia are Darwinex and Tradeo.
Darwinex
Highlight: Unique Approach to Copy Trading
Darwinex is a unique copy trading platform that allows investors to copy the trades of professional traders, who are referred to as “Darwins.” The platform uses a proprietary algorithm to evaluate the performance of traders and assigns them a risk rating, making it easy for investors to find the best traders to follow. Additionally, Darwinex has a feature that allows traders to invest in the top-performing Darwins, the so-called “Darwin exchange-traded funds” (ETFs) which are portfolios of the best-performing Darwins. This gives traders the chance to diversify their portfolios and invest in a group of top-performing traders, rather than just one. In terms of safety, Darwinex is regulated by reputable regulatory bodies such as the Australian Securities and Investments Commission (ASIC).
AvaTrade
Highlight: Social Network
PLACEMENT_4is a trading platform that offers traders a unique set of features to enhance their trading experience. One of the standout features of AvaTrade is its advanced charting tools that allow traders to analyze the market in real-time and make informed decisions. The platform provides a wide range of technical indicators and drawing tools that traders can use to identify key levels of support and resistance, chart patterns, and other market indicators. Additionally, AvaTrade offers a user-friendly interface and a comprehensive suite of trading technology, making it a popular choice for both novice and experienced traders.
What Is The Best Crypto Copy Trading Platform?
When it comes to crypto copy trading, two of the best platforms in Australia are CryptoTrader and CryptoHopper.
CryptoTrader
Highlight: Accessible Interface and Design
CryptoTrader is designed to make it easy for investors to find the best traders to follow and manage their portfolios. One of the main features of CryptoTrader is its accessible interface, giving novice traders the ability to easily navigate the platform and find the best traders to follow. The platform offers a variety of educational resources, including webinars, tutorials and market analysis to help investors learn about the markets to make more informed decisions. Overall, CryptoTrader is considered a reliable and user-friendly copy-trading platform for cryptocurrency traders due to its accessibility and easy-to-use interface that is specially designed for beginner investors.
CryptoHopper
Highlight: Pre-Built Technical Indicators
CryptoHopper is an automated copy trading platform for cryptocurrency traders. The platform allows investors to automate their trading strategies and to follow and copy the trades of professionals in the market. One of the main features of CryptoHopper is its pre-built technical indicators and settings that allow investors to create their own custom strategies using the platform’s scripting language. This allows traders to execute trades even when they are unable to monitor the market. Additionally, the platform allows for backtesting trading strategies to ensure that the chosen strategy of the user is profitable. CryptoHopper’s advanced interface gives investors a variety of options and opportunities.
Is Copy Trading Profitable?
Trading in financial markets carries inherent risks and there is no guarantee of profit. This is also true for copy trading, which can involve the same risks as regular trading, including the potential for loss of capital. It is uncommon to achieve high annual returns without taking on significant risks and relying on luck. Copy trading can be profitable if you are able to accurately predict which signal providers are going to be successful. That task, as you can imagine, is easier said than done.
Most platforms incentivise popular, copied traders to perform well, and, often, brokers reward these traders for increasing their follower count. Every signal provider is out to make a profit, and they are backed by a proven record of success and a desire to increase their incentives. Copy trading stands as good a chance as any strategy at being successful in the volatile financial industry. Additionally, its flexibility means that, if you find that you are not profiting with this tool, you can easily find a new signal provider or change strategies to something more suitable.
Is Copy Trading Legal?
Copy trading is legal in Australia, as long as the platforms and brokers providing this service are regulated by the Australian Securities and Investments Commission (ASIC). Copy trading is considered a form of investment management, and is regulated under the Corporations Act 2001. As long as the platforms and brokers providing copy trading services are registered with the ASIC and comply with all regulations, copy trading is considered legal in Australia. It is important for traders to ensure that they use a regulated platform to ensure that their investments are protected and to ensure compliance with the law.
Pros and Cons of Copy Trading
The pros and cons of copy trading vary, and whether you will choose this strategy depends on your profile as a trader. Copy trading is best suited to beginners, as it requires little-to-no trading experience—you only need to be able to determine which signal provider is best for your goals. Additionally, traders without the time to devote to market research (i.e. those for whom trading is not their primary career) can also benefit from this efficient signal provision service.
Some of the pros of copy trading include
- You can invest with limited market knowledge.
- You can learn the way in which professional traders operate.
- Copy trading saves time because it automates the trading process.
- You can customise copy trades based on your needs and set your own parameters.
- Copy trading is an opportunity to diversify your investments.
- Conversely, you can work as a signal provider and earn extra money for providing this service.
Some of the cons of copy trading include
- Though you can set parameters, you do not have actual control over trading decisions.
- Results are not guaranteed.
- Copy trading can involve a higher budget than non-copy trading.
Keep in mind the pros and cons of this service when deciding whether copy trading is right for you. The results are not guaranteed with signal provision, though copy trading can be an excellent way for industry newcomers to learn how experienced traders conduct business.