With the growing popularity of sites like eToro, more investors in Singapore are thinking about dabbling in trading. The prospect seems tempting: all you need to do is put some money, the program reduces the experienced trader in buying and selling (stocks or currencies or commodities…. Etc.)
Here’s what the beginner should know before trying it.
How Copy trade work?
Copy trading is a tactic used by some newer investors who don’t have the necessary experience. This is as simple as putting your money, choose next, and then let the site try to choose the trader buying and selling with your own cash. The most famous of these is the eToro, ZuluTrade, Currensee.
Most of the time these sites give these traders an incentive to be copied. On eToro, for example, trade earn small commissions on the basis of the number of people copied. Note that people who copy other traders can also, in itself, can be copied and earn commissions.
On the surface, this seems like a clear way to earn passive income. However, there are risks that you need to look out for:
- Is the risk of loss of capital
- Choosing a business is not easy
- Not following the relatively serious
- Copy trading should be a learning tool, not a magic wand
Is the risk of loss of capital
There is no way around the fact that trading is a high risk activity. You have to realize that, every day you trade, you risk the loss of capital – it is quite possible to put in S$5,000 and walk away with nothing.
Copy trading should never be equated with financial products such as endowments and investment linked policies, unit trusts, and so forth. Unlike these products, the return of copy trading sharply lower, fluctuating significantly every day. You must be psychologically prepared to see heavy losses in some days, and if you are risk-averse and this can keep you awake at night.
You should not sink your savings or retirement fund in the copy trading only use money you can afford to lose. And let’s talk honestly: if you’re the type who can afford to lose money, maybe you’re smart enough that you don’t need to copy other traders.
Choose traders to follow is not easy
There can be thousands of traders for you to follow. Choosing a “good” dealer is not a simple process. You need to consider what’s in the (stock or currency or commodity?), And if the approach suits you.
If you don’t have a lot of money, for example, copying the aggression of a forex trader is likely to wipe in a matter of days. If you choose to trade with a 100 per cent win ratio may learn later because these traders refuse to close losing positions instead of waiting for the price to return (this approach gives the following 100 per cent win ratio, while at the same time making it a high risk. These traders do not cut losses).
Some sites encourage merchants and their followers to talk to each other. But a nice competent the following may seem, remember those business (1) get a commission for allowing you to copy them, and (2) may have little real interest in the welfare of their followers.
“Trading teacher” is not your financial advisor, and will not avoid the risk, just because it puts his followers like you in danger. If you can’t afford the same your risk the trader can the problem they are not accountable.
(And if these traders happen to be millionaires, their version of the “small risk” may be something physically destroy you.)
Not following the relatively serious
Most sites enables you to follow the page relatively. For example, the system may place your trades, dollar wise in a ratio of 10 per cent of whatever the next buy – if the trader buys a S 100 000 gold you can buy S$10,000 worth of gold.
A beginner must not under any circumstances, copy the following without staying in proportion. For example, if a trader buys a S $ 100,000 in gold, don’t decide to “taste must be good”, then ignore the fixed 10 per cent Open S$50,000 for gold.
Established trade reason due different amounts in different assets; a story of to imitate them because you don’t understand these reasons (until now). If you intend to copy the trade, then make sure you stick to the “copy” in all respects.
Copy trading should be a learning tool, not a magic wand
Regardless of what you may have heard, copy trading is not – not – intended to help lazy people magically make money. Is not a get rich quick scheme, it will punish you if you try to treat it as one.
The purpose of copy trading or social trading – is to help beginners who have a genuine interest in learning how to trade. This ranges from student finance, that people who have decided on a trading career path. Copy trading allows them to interact with experts and analysis of different strategies, and to develop a better understanding of different trading systems.
This is the cause of these sites, consider web talks and coordination forums. It’s not just a chatty diversion.
If you really want to educate yourself on trading, and copy trading revolutionary learning tool; previous generations of traders have been killed. But if you think that copy trading is an easy way to make passive income, then you’ve really got the wrong idea. This like thought School of cooking for McDonald’s.