Copykat trading is a trading strategy that copies the trades of other people and then trades in a similar way.Copykat traders are not concerned with the market’s movement and they do not have to worry about whether the trade is profitable or not. They just follow the trade of others without understanding how it works.The Copykat trading strategy is becoming more popular among retail traders who believe that following this strategy can help them improve their chances of making money.
How to become a CopyKat?
Copykat investment is more common than one might assume, albeit it is frequently done covertly and quietly by investment firms such as mutual funds and investment firms. However, the concept of piggybacking on someone else’s investment ideas appears to be have taken on with small investors. In February of that year, Usa research company Aite Group listed “copy trading” as being one of the top ten financial planning trends. The first Copykat traders would constantly scan legal documents from collective fund providers to see which equities star management had recently piled up on. Internet value investment research firms, such as Guru Focus, now provide an option to this time-consuming procedure by monitoring and showing the positions of the greatest investors and financial managers.
The “mirror investing” movement has taken the Copykat method and pushed it a step beyond. Systems like TD Ameritrade’s Autotrade allow a customer to link retirement investments to assets active management by other individuals or investment advisors, and the latter’s financial moves are automatically mirrored within certain allocations defined by the customer.
The apparent distinction among Copykat trading and mirrored investing would be that the first strives to replicate trade ideas of very well and renowned investing gurus while the latter does not.
What can be the risks?
Copykat trading has become a popular trend in the recent years because it offers easy money for little effort and no risk. However, this trend can often lead to scams and losses for the traders such as:
There is no sure-fire financial approach. For instance, if adopting a real worth manager, a copykat trader may have to remain with the approach for several years because active funds might take a lifetime to come around. In this situation, losing tolerance and quitting the approach too soon might lead to huge losses.
Between both the time a stock is purchased (or traded of) by a financial consultant and the moment this information is publicly revealed, it is possible that it has moved dramatically. For the copycat trader, this one has a negative impact on the stock’s investment strategy.
Quite so many investors, both retail and corporate, are keeping a close eye on the top investment companies and wealth managers. Given the rapidity with which information is disseminated and traded presently, a trader who’s just a late to a copykat transaction is at a disadvantageous position, since the stock might have risen quite somewhat in a short period of time.
Your investing time horizon and goals may differ from those of the wealth manager. For instance, you could have a very limited time horizon, but the boss you’re mimicking might be in it for the foreseeable future. Alternatively, the money management’s risk level of tolerance may be significantly higher than yours.
How Copykat Trading can Help with 5 Amazing Use Cases?
The use cases of this software are endless and they cover a wide range of topics such as stock market, story generators, auto trading, etc. The most common use case of Copykat trading is the stock market where you can predict movements in the stock market and get a profit while predicting the movement in particular stocks. The software has a variety of filters that allow you to choose which stocks to trade and it also comes with great support for Forex, options, commodities, etc. Copykat trading has its place when it comes to trading FX and CFDs but we would not use it for picking individual stocks on a daily basis
However, it is not a bad option when you want to trade with a really low-risk amount. For example, we would trade at the SP500 and use the Copykat trading strategy for $100 or less. We would also use this strategy in a very volatile market. For example, if the FX was swinging 10% on an hourly basis, we would go short a fraction of the number of futures. If the market experienced a 15% drawdown (slope) , we would take profits and lock in those gains on an hourly basis.
While there are consequences to copykat investing, widely accepted metrics such as following effective shareholders, getting exercise patience, searching for buildup, trying to diversify across sectors, and trying to conduct your own thorough research can help you get to be a (near) ideal copykat and increase your odds of high rate of return.