How To Evaluate And Follow Top Performing Copy Traders
Copy trading is gaining popularity as a method of trading in the financial markets. It enables traders to easily copy the trades of other professional traders, also called ‘copy traders’ in real-time. This trading strategy is popular among beginners who want to make significant profits in the financial markets without having to spend lots of time analyzing market data or developing their unique trading strategies.
Nonetheless, copy traders are different. Some perform a lot better than others. Here, we will determine how to analyze and follow the top-performing copy traders.
Select A Copy Trading Platform
The first step in analyzing and following the best and top-performing copy traders is to select a copy trading platform. There are many copy trading platforms available in the market, including BingX, Prime XBT, and NAGA. Every platform has its distinct features and benefits.
Some of these platforms let you follow and copy many traders concurrently, while others let you copy one trader each time. When looking for a copy trading platform, consider these factors:
- Reliability and reputation of the platform
- The platform’s transparency
- Range of assets available for trading
- Availability of top-performing copy traders
- Fees and other charges
Examine The Performance Of Copy Traders
After selecting a copy trading platform, the next step is to analyze the recent performance of the copy traders. The copy traders’ performance is normally measured in terms of profit and loss (P/L) and the percentage of the profitable trades.
To evaluate the performance of copy traders, always consider these factors:
- Risk management – review the risk management strategy used by the copy traders. A great copy trader must have a well-defined risk management strategy that mitigates losses and maximizes profits.
- Historical performance – analyze the historical performance of copy traders over a long time. A good and experienced copy trader should have a constant track record of profitable trades.
- Trading method – always review and study the trading style of the copy traders. An excellent copy trader needs to have a trading style that is compatible with your trading style and risk appetite.
Follow The Top Performers
After a careful analysis of the performance of copy traders, the next step is to follow the best and top-performing copy traders. These top performers need to have a proven track record of profitable trades over a long period. By following these top-performing copy traders, you boost your chances of making lots of profits in the financial markets.
Here are the factors you need to consider while following these top-performing traders:
- Trade frequency – consider the trade frequency of copy traders. A great copy trader needs to have a reasonable trade frequency that is not too high nor too low.
- The number of followers – look at the total number of followers who trust a copy trader. Any copy trader with a large following is a good indicator of their performance.
- Communication – communication is important in any industry. Review the communication strategy of the copy traders to determine your best choice. A good copy trader always communicates with their followers and offer regular updates on their trades.
Diversify Your Investment Portfolio
It is advisable to diversify your portfolio when copy trading. Diversification helps you spread your investments across multiple assets and copy traders. By diversifying your portfolio, you can minimize your overall risk, which increases your chance of making profits.
Consider the following factors to help you diversify your portfolio effectively:
- Copy trader allocation – ensure that you allocate your investments across various copy traders with different risk profiles and trading styles.
- Asset allocation – distribute your investments across various assets including forex, stocks, cryptocurrencies, and commodities.
- Risk management – always have a well-defined risk management strategy that consists of portfolio rebalancing and diversification.
The Takeaway
Copy trading is a convenient method of trading in the financial markets for beginners and even expert traders who do not wish to spend lots of time analyzing the markets. But, copy traders are not all the same. Some perform better than others. Eventually, choose a reputable copy trader with a proven track record to succeed in the markets.
David Anderson is a writer and researcher for Copy Trading Critic. David provides comprehensive news articles from the online trading world. He also writes reviews and analysis of copy trading platforms and strategies.