eToro Presents: Top Five Copy Trading Mistakes
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Written by: submitarticler
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Date: Sat, 14 Jan 2012 |
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At first glance, social trading seems simple enough, and indeed for the most part it is. There is no doubt that managing a people based portfolio is a much simpler task than managing different assets in different markets, all vulnerable to the whims of volatile market swings. With copy trading, instead of analyzing complex technical price movement and fundamental economic forces, all one has to do is find someone who will do it for you and who will do it well. However, it is wrong to assume that if you just start copying the top ranked eToro traders, you will become rich in the blink of an eye. In fact, this kind of copy forex trading strategy in more likely to lead to a swift bankruptcy than anything else. In order to save you from this cruel fate, we now present you with the top five mistakes to avoid when starting your people based portfolio.
1. Choosing traders by win ratio While you want the traders you copy to have a good win ratio, it is more important to look at the trader’s gain percentage as a measure of his success. Remember that a trader with a 95% win ration may have lost half his money thanks to his 5% of bad trades. But a trader with 95% gains has almost doubled his account, even if his wins ratio hasn’t been as good.
2. Copying traders with similar portfolios You may think that it doesn’t matter what instruments the trader you copy invests in, as long as he/she make profits, but if you start copying two traders or more with the same portfolios they may end up canceling each other out, and you’ll end up paying for the spreads.
3. Leaving it to the pros Just because traders have good stats, doesn’t mean that they’re infallible or that they will necessarily perform just as well in the future. Always keep an eye on your copied trades, making sure to step in when a trade is clearly not going as planned, and get rid of traders who underperform. There are always plenty of new gurus for you to copy.
4. Copying copiers who copy Many traders on eToro's OpenBook achieve great stats by copying other traders, after all, that is the point of CopyTrader. However, wouldn’t you rather copy the original guru rather than his/her copiers who are much more likely to make uninformed decisions? To avoid this scenario, make sure that the trader you’re copying isn’t copying any other guru.
5. Staying in the dark The only way to really stay on top of your people trading portfolio is to know something about the markets, about trading currencies and about managing risk. With all the time you save by copy trading, why not use eToro’s free educational tools to hone your own trading skills so that when the time comes, you can take over your own trades.
In the forex trading online market, it is crucial to be informed on a regular basis, that is why being updated with the latest forex news is what every professional trader is expected to do.
Source: eToro Presents: Top Five Copy Trading Mistakes
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