Is Copy Trading Profitable? How Effective Can It Be?


A lot of people wonder whether copy trading is still profitable. Even if people had success with it in the past, is it still possible to make money with copy trading today? Is copy trading effective? 

Copy trading is profitable, and it can be very effective. Make sure to choose a copy trading platform with low transaction fees and good spread rates. Also make sure to copy the right trader – someone who has achieved success consistently over the past few years. 

In this article, you will learn about copy trading and why we think it can be very profitable. You will learn why copy trading is one of the most effective ways to trade if you are a complete beginner. Let us get into it. 

IMPORTANT SIDENOTE: I surveyed 1500+ traders to understand how social trading impacted their trading outcomes. The results shocked my belief system! Read my latest article: ‘Exploring Social Trading: Community, Profit, and Collaboration’ for my in-depth findings through the data collected from this survey!

What Is Copy Trading?

Copy-trading involves copying the trades of other traders. It is often called mirror trading because you will be “mirroring” the trades of a trader who has been successful before. A copy trading platform will allow you to copy a successful trader who has been earning significant returns year after year. 

Why Do Copy Trading?

Why is copy trading good for beginners? That is what we will address in this section. Here are some of the top benefits of copy trading. 

No Experience Needed

You don’t need any trading experience to be successful with copy trading. All you have to do is know how to pick a successful trader. We will talk more about how to effectively copy trade later and explain how to spot successful traders to copy. However, you don’t need to have done any trading of your own to be profitable with copy trading. 

Low-Risk Potential

One of the biggest problems with trading by yourself is that you may lose your initial investment. This problem is especially true when you are new to trading, as you will likely spend money on things that will not be successful. For example, you may buy a stock because it looks cool, even though the long-term prospects for that stock are not that good. 

Even if a stock is going up rapidly right now, it does not mean it is good in the long run. That can only be determined by looking at the stock’s overall gains in the past years and decades. You also have to look at the viability of the project or the company itself, whether you invest in crypto assets or stocks. Some stocks or crypto assets go up due to hype, not because the actual asset or stock is viable. 

Learn How To Trade

You can even learn how to trade successfully by watching what the trader is doing. Since it is your money involved, you will be paying attention to what that trader is doing. You may learn which stocks are profitable, for example, or you may learn how to avoid buying the highs and selling the lows. 

Avoid Bad Emotional Trades

A big problem beginner investors face is that they tend to make emotional trades. For example, when they see that many people made a lot of money with Bitcoin in the past few weeks, they are tempted to buy it, not realizing that they are already approaching the end of the bull run and the price is about to go down again. Then, when the price goes down, they sell it at a loss instead of just holding it, which might be the best long-term investment plan. 

Since you won’t be doing the trades yourself, there is less chance of making emotional mistakes. That doesn’t mean they can’t happen, as we will explain below, but if you trust the trader enough and trust that they know what they are doing, you will be less tempted to make an emotional mistake. 

This video can teach you more about emotional trading: 

How Effective Is Copy Trading? 

Copy-trading can be very effective. However, it is only as effective as the trader you choose. That is why you have to choose a good trader to copy. We would recommend choosing a trader who has been earning a return of at least 7-10 percent over the past few years. Don’t pay attention to traders making a lot of money during crypto bull runs, as they are not special, and everyone can do that. 

Also, copy trading is only as effective as how much you invest. If you earn a 15 percent return and only invest $300, you will only earn $45 a year. That is not a lot. However, if you are earning a return of 15 percent per year and you invested $10,000, you will earn a return of $1,500 a year. Of course, with forex and crypto trading, you will often see profit margins that are a lot higher than that. A good forex or crypto trader can make many times that amount. 

How To Be Effective at Copy Trading?

In this section, you will learn how to be effective at copy trading. We will provide some tips that will help you be profitable at copy trading, regardless of your current trading experience. 

Check Spreads and Transaction Fees

One of the downsides of using copy trading platforms is that transaction fees and spreads can often be higher than on regular trading platforms. Newbie traders may not often be aware of these extra costs, especially when it comes to spreads. Do your research to ensure you are using a reliable copy trading platform with low transaction fees and good spreads. 

Choose a Good Trader

This point should go without saying, but too many newbies jump into copy trading without researching the trader they are copying first. Here are some things you should ask yourself when before deciding to copy a specific trader.

  • Does this trader have a long track record of success? That means the trader should have had success for at least two or three years. One year is not enough, as a success for just one year may mean that the trader has had some luck or that year was a bull run year. 
  • Does the trader have success only at certain times or in certain months? That may be another indication that they are only lucky sometimes and do not have a tried and tested trading strategy. It may also mean that there were bull runs during those times; as a newbie trader, you can’t be expected to know all the bull runs that happened in the past. 

Don’t Let Your Emotions Get the Better of You

Don’t bail out on copy trading just because you are experiencing a temporary loss. There may be a reason for the dip. If the trader has had success for a long time, trust them that they know what they are doing. There will always be dips in the market, but they are the time to buy, not to sell. 

Understand the Trading Strategy

It is important to understand the trading strategy of the trader you choose. While it is not a dealbreaker as long as the trader has a long track record of success, it will help you understand what the trader is doing so you don’t panic and take all your money out at the wrong time. You should also like the trading strategy so that you don’t have to keep switching between traders. 

Author’s Recommendations: Top Trading and Investment Resources To Consider

Before concluding this article, I wanted to share few trading and investment resources that I have vetted, with the help of 50+ consistently profitable traders, for you. I am confident that you will greatly benefit in your trading journey by considering one or more of these resources.

Conclusion

So, is copy trading profitable and effective? The answer is clear: yes. It is very effective, and it can be very profitable, but it is important to invest only as much as you can afford and choose the right trader to copy. Also, don’t let your emotions get the better of you; stick to it for the long run. 

BEFORE YOU GO: Don’t forget to check out my latest article – ‘Exploring Social Trading: Community, Profit, and Collaboration. I surveyed 1500+ traders to identify the impact social trading can have on your trading performance, and shared all my findings in this article. No matter where you are in your trading journey today, I am confident that you will find this article helpful!

Affiliate Disclosure: We participate in several affiliate programs and may be compensated if you make a purchase using our referral link, at no additional cost to you. You can, however, trust the integrity of our recommendation. Affiliate programs exist even for products that we are not recommending. We only choose to recommend you the products that we actually believe in.

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    Navdeep Singh

    Navdeep has been an avid trader/investor for the last 10 years and loves to share what he has learned about trading and investments here on TradeVeda. When not managing his personal portfolio or writing for TradeVeda, Navdeep loves to go outdoors on long hikes.

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