A lot of you may ask: Is copy trading effective? With all the new things in the stock market, for sure, you are curious to know their effects, especially if you haven’t tried them. Now, let’s talk about copy trading. In my recent post, I’ve talked about what it is, what kind of investor you should copy, and how much money you need to start investing. I hope I’ve given you enough information to some basics about this new strategy.
Today, I will share with you some ideas to answer your question about the effectiveness of copy trading. Is it always green when you copy trade? Will you always take profit?
One thing I can assure you is that copy trading is effective for long-term investing. Invest with a goal of holding it for 5 or more years. After that, you will see your portfolio grow bigger and bigger. Copy trading is effective when you allow years to pass and when you regularly add to your investments. The opposite will happen if you become impatient and you try to stop copying your investor after a week or a month at a loss. You need patience with copy trade.
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Like any other way to make money, copy trading is not a get-rich-quick scheme. You can’t invest in eToro or other US brokers, choose an investor and expect that you can make millions in a short span of time. Again, it takes some time to see huge growth in your portfolio. You need patience, patience, and a lot more patience. You also need discipline. You have to regularly invest so that you can accumulate your wealth. There’s so much to learn about copy trading too including the perfect time to add funds, withdraw your profit, how to look for a good investor, and so on.
Also, the effectiveness of copy trading depends on the market condition. During the past two weeks, the US stock market has been correcting. Instead of the usual 1-2 days correction, the market is actually on a downtrend, which made some investors withdraw their money and some public investors (who are being copied) go private so as to keep people from copying them at the moment. Considering this, the condition of the market is a factor when determining whether copy trading is effective or not. Since your public investors are human investors too, you will just follow what position they are going to open. When the market is down, your portfolio is red. When the market is up, your portfolio becomes green.
In my previous post, I’ve talked about the level of risk of a good investment before you should copy him or her. Again, it is a factor that affects how good or bad copy trading is. An investor who has a risk of 8 with more than 100% gain over a month is not good. Why? Because maybe that’s just a good month where the market is bullish. You know what happens when the market becomes bearish. Always stick to low-risk investors if you want copy trading to be effective.