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.
Meaning that when a professional trader buys, you buy with him, and when he sells, you sell with him.
Previously common were recommendation packages with monthly subscriptions exceeding hundreds of dollars.
But with copy trading, it offers a system that is supervised by the platforms, guarantees your rights, and protects you from the scams that were common in recommendation groups.
If you decide to start copy trading through 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 gain, the return on investment (ROI) percentage is the key 📊
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 certain period.
But this number may not reflect your expectation of profit. The trader may have made a profit of $1,000, but his basic capital was $100,000, which means his profit rate is 1%.
As for the ROI rate, it reflects the percentage of profit from capital during a certain 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 greater the probability of a large profit as well as the probability of a large loss.
Therefore, you must determine how much risk you are prepared to take.
One indicator that helps you determine risk is the MDD indicator, which aims to measure the greatest amount of negative fluctuation in the value of the main trader's investments.
If a trader's MDD ratio is 10% over a period of seven days, this means that the value of his investments decreased by 10% during this period.
If you prefer to avoid risk or high volatility, choose a trader with a low MDD ratio.
3. Did the trader win as a result of luck or professionalism? 🎯
Imagine this scenario: a trader makes a 50% profit on capital within one month. Why is this profit not a stroke of luck?
Therefore, do not just look at the profit numbers, but also look at an important indicator, which is the Win rate, which measures the number of days during which the main trader’s investments were profitable.
If you find that the Win rate for a month for a particular trader is 10%, this means that the trader was profitable only three days of the month.
In the end 🏁
Every rule has its own exceptions, and the above factors help you choose a master trader, but predicting market performance may be more complex than that.
So do your own research before making your investment decision. 🧑🔬🔬
