Copy trading has become an increasingly popular phenomenon in the crypto world, allowing investors to automatically follow and copy the trading strategies of experienced traders. With the crypto market continuing to grow and volatility high, using copy trading can be an interesting strategy for managing your investments. Here are some tips that can help you use crypto copy trading more effectively in 2024:
1. Choose a Trusted Copy Trading Platform
Choosing a copy trading platform that is trusted and has a good track record is very important. Make sure the platform offers a quality selection of traders, transparency in trading results, and a strong security system to protect your funds.
For example, Binance which also has a Copy Trade feature.
You can check here: https://www.binance.info/en/copy-trading to see the traders you can copy.
What are the rules for Binance Copy Trading?
Here are the rules:
After copying the portfolio, the system will automatically copy the trades executed by the lead trader for the copy trader.
Rules for opening and closing positions
Open position:
Close Position:
How to calculate the size of open and close positions?
[Fixed Ratio] Mode
Open a position: The cost of a copy trader's opening order is comparable to the cost of a lead trader's order. However, the copy trader's entry price may not be exactly the same as the lead trader's entry price. Please note that slippage may affect the size of the copy trader's position and the final position may be lower than the lead trader's position.
For example, the lead trader's available margin balance is 1,000 USDT and he opens a position with an order fee of 500 USDT (50% of the available balance). If the copy trader uses 500 USDT to copy the portfolio, the system will use 250 USDT as the opening fee to open the position. However, please note that the final order size may be lower than 250 USDT due to slippage.
Close position: For example, the lead trader has a position of 1 BTCUSDT and partially closes 20% of his position (0.2 BTC). If one of the copy traders copies a trade with a total investment amount of 0.6 BTC, the system will automatically close 20% (0.12 BTC) for that copy trader.
[Fixed Amount] Mode
Open position: The system will open each trade using a fee per order amount set by the copy trader.
For example, a copy trader sets a fee per order amount of 20 USDT and the total investment amount is 60 USDT. The system will copy each new trade with an opening fee of 20 USDT. After copying 3 orders, the margin balance will be 0 (lower than the cost per order amount). Therefore, the copy trader will no longer be able to copy the lead trader's position because his margin balance is insufficient.
Close position: For example, the lead trader has a position of 1 BTCUSDT and partially closes 20% of his position (0.2 BTC). If one of the copy traders copies a trade with a total investment amount of 0.6 BTC, the system will automatically close 20% (0.12 BTC) for that copy trader.
Please note:
If the number of open positions does not reach the minimum trade amount, the system will open the position using the minimum trade amount. For more details, please read the Trading Rules.
If the number of open positions exceeds the maximum amount allowed for the selected leverage level, the system will open the position using the maximum amount allowed. For more details, please read Leverage and Margin Futures USDⓈ-M.
Opposite/offset position
Lead traders can open opposite positions to limit losses/profits.
If the lead trader and copy trader open the same position: When the lead trader places an order to close the current position and open the opposite position, the system will only close the copy trader's position and will not open the opposite position.
If the lead trader opens a long position, but the copy trader does not: When the lead trader places a sell order to open the opposite position, the system will open a short position for the copy trader.
Why do copy trading fail?
The available margin balance in the copy portfolio is insufficient;
When the lead trader uses a limit or stop-limit order to open a position, but the order is not fully filled;
When market slippage exceeds the limit;
When the lead trader opens an opposite position (please read the description in “Opposite position/offset”).
The position's notional value is below the symbol's minimum notional value.
Note: When the copy portfolio margin balance is lower than the minimum copy amount and fails to copy 5 consecutive orders, the portfolio will be closed automatically. Possible reasons for failure include insufficient margin, not meeting the minimum order size, etc. The system will check and close portfolios of copies that do not meet the requirements every Friday.
Why is the final position size smaller than the cost per order amount/fixed ratio amount?
If the IOC limit order is partially filled;
In [Fixed Amount] mode: When the available margin balance is below the cost per order amount, the system will use the remaining balance to create an order;
Due to slippage, some copy traders may not be able to copy orders, so the system will check the dynamic maximum size for each symbol. If the number of copy traders exceeds the limit, the system will reallocate the number of copy trades from all copy traders, which may cause the final position size to be smaller than expected.
2. Research the Trader You Will Copy
Before deciding to copy a trader, carefully research their performance and trading strategy. Consider factors such as return on investment (ROI), consistency of results, number of followers, and comments from previous followers.
3. Diversify the Copied Trader's Portfolio
Diversifying the portfolio of traders you copy can help reduce risk. Choose multiple traders with different styles and strategies to compensate for the high volatility of the crypto market.
4. Set Risk Limits and Capital Management
It is important to set risk limits and manage capital wisely. Copy trading platforms generally provide features for setting stop-losses and other risk limits. Make sure to utilize it according to your risk profile.
5. Monitor Performance Regularly
Even if you use copy trading, stay involved by regularly monitoring the performance of the traders you copy. Review their trading strategies, as well as whether there have been any significant changes in their results or approach.
6. Pay attention to fees and commissions
Pay attention to the fees and commissions charged by the copy trading platform. These fees may vary between platforms and may affect your overall investment results.
7. Pay Attention to Market Trends and Latest News
Stay up-to-date with the latest market trends and news in the crypto industry. Regulatory changes, major project announcements, or geopolitical events can significantly impact the market.
8. Learn and Improve Your Knowledge
While copy trading can make the investment process easier, it is important to continue learning and improving your understanding of the crypto market. The more you understand trading strategies, the better you can judge the quality of the trader you want to copy.
