The concept of social trading has already proven that it’s not just a nice addition to a trader’s routine, but an actual revolution in the way people trade. Since the launch of eToro OpenBook, and specifically the CopyTrader feature, the performance of eToro traders has gone up by approximately 15%. This comes as no surprise since CopyTrader enables eToro traders to dedicate a portion of their funds to copying the trades of any other trader in the network, thus giving them the opportunity to capitalize on the experience of successful traders. However, copy-trading has its own dos and don’ts that may not be immediately apparent to the novice copy-trader, no matter how many years of regular trading experience they have under their belt. In order to make things easier, we’ve asked some of our most successful copy-traders for their top copy-trading tips, and the results were as follows:
1) Diversify
Even though eToro lets you dedicate as much as 20% of your margin to any one trader, the people with the most successful copy-trading portfolios recommended to dedicate a maximum of 10% to any one trader in order to ensure portfolio diversity. They also advised to look at traders’ portfolios carefully before deciding to follow them in order to ensure that you don’t end up copying ten different traders who all trade the EUR/USD exclusively, thus exposing your own portfolio to too much risk.
2) Gains over win ratio
When looking for traders to copy, it may seem wise to look for traders with the highest win ratio (i.e. the percentage of profitable trades out of the overall number of trades) as the best traders to copy, however our survey showed that all the successful copy-traders prefer to look at gains instead. One trader explained that this is because, while win ratio shows the ability of the trader to analyze the market it doesn’t reflect the magnitude of the profits or losses and thus doesn’t reflect his/her ability to capitalize on the market movement.
3) Test run
The experts agreed that it is always best to start copying a new forex trader with only a small percentage of your margin (around 5%) to see the kind of profits he can potentially bring to your people-based portfolio. Once the trader proves that he/she can consistently deliver, you can increase your investment. They also recommended to always keep some of your margin free in order to scout around for new emerging trading stars who can take the place of underperforming traders in your people-based portfolio.
We hope these tips serve you well as you join the social trading revolution at eToro.
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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.
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