Copy trading: The easiest way for beginners to start trading in 2024
Copy trading: The easiest way for beginners to start trading in 2024
If you are a beginner in the digital currency market, there is no doubt that copy trading is the easiest solution for you to start making a profit from trading.
Copy trading is based on a simple idea, which is that you allocate a certain capital to copy the trades of a professional trader.
This means that when a professional trader buys, you buy with him, and when he sells, you sell with him.
Previously, recommendations groups were known for monthly subscriptions exceeding hundreds of dollars.
But with copy trading, you come up with a system supervised by the platforms that guarantees your rights and protects you from the scams that were common in recommendation groups.
If you decide to start copy trading with Binance, you should choose your master trader carefully.
Here are three key factors to consider when choosing a master trader:
1. Don't be fooled by the big profit, the return on investment (ROI) is the basis 📊
When you enter the copy trading page, you will see a list of several traders and each trader will have a PnL number, which is the amount of profit or loss during a specific period.
But this number may not reflect your expected profit. The trader may have made a profit of $1,000, but his initial capital was $100,000, which means his profit rate is 1%.
The ROI rate reflects the percentage of profit from capital during a specific period, and gives you a better view of the investment performance of the main trader.
This way, you can make predictions about the profit a trader can make over the course of a week or a month for example.
2. Determine the risk level ⚠️
In general in trading, the higher the risk, the higher the potential for big profits and also the potential for big losses.
So you have to decide how much risk you are willing to take.
One indicator that helps you determine the risks is the MDD indicator, which aims to measure the greatest negative volatility of the value of the main trader's investments.
If a trader's MDD ratio is 10% over a seven-day period, it means that the value of his investment decreased by 10% during that period.
If you prefer to avoid risk or high volatility, choose a trader with a low MDD.
3. Did the trader win as a result of luck or professionalism? 🎯
Imagine this scenario: A trader made a 50% profit on capital in one month. Why isn’t this a stroke of luck?
So don't just look at the profit numbers, but also look at an important indicator, which is the Win rate, which measures the number of days that the main trader's investments were profitable.
If you find that the Win rate for a month for a particular trader is 10%, it means that the trader was profitable for only three days of the month.
In the end 🏁
There are exceptions to every rule, and the above factors will help you choose the right trader, but predicting market performance can be more complicated than that.
So do your own research before making your investment decision. 🧑🔬🔬