The crypto market trading scene has drastically changed since the early 2010s. Previously, average traders had no easy options to enter the crypto scene and acquire desired coins in their portfolios.
Now, crypto trading has been simplified to the level of conventional markets like fiat. Digital trading innovations have streamlined the entire trading process and introduced numerous handy tools like trading platforms, crypto trading bots, etc.
Arguably, however, the most crucial disruption was the introduction of automated trading styles into the crypto field. Social trading and its subsets have made it trivial to jumpstart your investment journey. Today, we will discuss one of such invaluable trading mechanisms, crypto copy trading, and how you can use it immediately.
- To copy trade crypto, you need to follow the decisions of experienced traders in the crypto field.
- It automatically links your portfolio to desired trading experts, mirroring their strategies.
- This strategy is excellent for minimising investment risks and lowering entry barriers to the field.
- Setting up a copy trading account is easy, but this practice still requires a sound understanding of fundamentals.
Understanding the Crypto Copy Trading Strategy
It is no secret that trading requires experience and practical knowledge. These skills can often be learned and polished through years of hard work and gradual mastery.
The most successful traders in any field have been there for at least five or ten years, learning industry trends and acquiring insider knowledge. Naturally, as a newcomer trader, it is almost impossible to trade with the same expertise and fluency as adept professionals.
The copy-trading strategy has been devised to bridge the gap between beginners and pros by letting the two parties establish a mutually beneficial relationship.
Now, newcomers can get access to the complex trading strategies of successful traders and follow these tactics as closely as they desire. The most significant advantage of copy trading is that it is automated, which means that traders will not have to fear that they made any human errors.
Advantages and Possible Challenges
The highly accessible nature of copy trading allows it to shine in the newcomer trading landscape, allowing individuals to enter the investment field without substantial prior knowledge. It also enables more experienced traders to develop additional sources of income aside from the trading profits. However, copy trading comes with inevitable trade-offs to consider. Let’s explore.
Lower Entry Barriers
As mentioned above, the most significant advantage of copycat crypto trading is its simplicity and convenience. All users need to do is register on a copy trading platform or download a copy trade app. After that, a simple setup and onboarding are all that separates rookie investors from harnessing the complex trading strategies of industry elders.
Of course, the process is more complicated than a simple onboarding since copy traders still have to select desired strategies and individuals to follow. However, this process is significantly easier than the most accessible independent strategies.
The handholding provided by the copy trading mechanism is seldom matched on the market, which gives inexperienced traders time to learn while making profits immediately.
Less Decision-Making Risks
Copy trading can effectively shield investors from their own poor decisions. It is common to see newcomer traders make apparent mistakes, disregard compliance or regulatory guidelines, or simply bet on the wrong asset. Each of these outcomes is minimised or even eliminated with copy trading.
It is important to note that copy trading is not entirely automated like mirror trading. Instead, this mechanism allows investors to adjust strategies, tweak their portfolios and change any other relevant details.
So, there is a fair amount of choice despite the limiting nature of copy trading. As a result, many believe that copy trading catches the perfect balance between minimising the risks of human error and still leaving room for choice.
The Uncertainty of Crypto
On the flip side, copy trading in crypto is still risky, even with the assistance of experienced investors. This sector is notoriously volatile and unpredictable, with crypto bull runs and bear markets happening every couple of years.
Many currencies emerge and disappear, resulting in substantial portfolio losses for investors. Even Bitcoin, the most reliable and long-standing coin in the market, often suffers from drastic price fluctuations.
The relative youth of the crypto sector causes this high degree of volatility. Additionally, the lack of uniform regulations has also troubled this industry. So, investors must understand the underlying risks when entering the crypto market, even utilising a safety net of copy trading.
Dependence on Traders
Another cause of concern for crypto copy trading is an almost absolute reliance on copy trading experts. Even the best crypto traders in this field can make mistakes, place unsuccessful bets and fail to recognise the underlying industry patterns.
So, copy trading is not a flawless strategy in terms of profitability, as even the best investors can mess up. The same is especially true for the crypto sector, as the ever-present market unpredictability makes it difficult to develop foolproof strategies.
How to Start Copy Trading Crypto
Now that we understand the copy trading fundamentals, let’s discuss how you can jumpstart your investment activities with this strategy.
The Initial Setup
The first and arguably the most crucial choice is to select the best copy trading platform for crypto. This process is subjective, and it entirely depends on your specific needs. A myriad of crypto copy trading platforms are available, offering different levels of automation, pricing packages, customisation options and trader rosters.
Generally, the most successful traders are always on costly crypto copy trading platforms. So, when searching for the best copy traders to follow, brace yourself for a hefty price tag.
Aside from these considerations, the platform should be accessible and straightforward. While copy trading follows the patterns of other investors, it is still important to analyse various charts quickly, track live price changes, and conduct other routine tasks.
You should also check if your crypto wallet is compatible with the platform. However, this should not be a problem with most high-profile copy trading platforms.
Developing Trading Strategies
While copy trading’s most significant advantage is that traders don’t have to worry about intricate strategies, having a general approach in mind is still advisable.
In this step, traders should decide whether to pursue aggressive or risk-averse strategy. It is also essential to choose the desired asset class of crypto.
The market is filled with exciting choices, ranging from flagship coins like BTC and Ethereum to high-utility projects like Solana that introduce inventive ways to utilise smart contracts. Finally, traders should decide what kind of portfolio balance they want to capture and which crypto niche suits them.
All of these decisions will play into selecting a desired copy trade target, as each successful investor occupies a specific niche and employs unique strategies.
Choosing the Copy Expert to Follow
Once you have selected the platform and chosen a general strategy, it is time to choose your target investor, following their decision-making process. Most platforms have the option to track multiple traders at once. However, different traders might sometimes follow strategies that could end up on the opposite side of the same trade deal. So, it is still essential to be aware of the investment decisions that your copy trade software makes for you.
It is also important to note that not all traders are available on every platform. So, if you have a specific individual or firm in mind, instead of selecting the best platforms for copy trading, you should reverse the process and find out which platform gives you access to them.
Crypto copy trading is an excellent choice for many industry newcomers. It effectively mitigates crypto’s everpresent volatility and uncertainty by linking your trading decisions to experienced professionals. However, a hefty price tag and the prevailing unpredictability of this sector should still be considered when committing to copy trading.
It is also essential to understand the fundamentals of crypto investing. This will help you make the right choice when selecting a copy trading target, aligning your goals and trading aspirations perfectly.