Are you new to forex trading but still want to make money while learning? Well, you can try a forex copy trading strategy.
If you have never heard about copy trading, it is a trading technique that involves replicating trading signals from experienced traders. However, the first step is to choose the best forex copy trade service.
Here, we will take you through the key factors to compare when choosing a forex copy trade service, especially if you are new to trading.
Check the Service Provider and Regulatory Information
Platforms offering forex copy trade services can be regulated. However, the regulations will depend on the country where the provider is based and the underlying platform.
Let’s take the example of forex brokers offering copy trading services. In this case, you must ensure the broker is regulated and has an active license from a renowned local or international financial regulator.
If the forex copy trade service provider is not a broker, ensure you run extensive background checks before signing up.
Examine the Available Copy Traders
What defines the best forex copy trade service? The first thing is the quality and variety of signal providers. A good platform should provide enough information to help you evaluate signal providers rather than simply displaying a list of traders ranked by returns.
Since you are new to forex trading, don’t get carried away by recent profits. Instead, evaluate the top traders on the platform by reviewing their historical performance and overall win and loss statistics.
Avoid selecting a forex copy trade platform solely because many signal providers have generated a large percentage return in recent weeks or months.
Understand How Risk Is Allocated
Copy trading doesn’t guarantee profits. In addition, you shouldn’t replicate every trade as is, especially if you are new to forex trading. If a strategy provider trades a large account and you have a much smaller account, blindly copying the same lot size could create massive risk.
Various copy trading platforms use different allocation methods to help you adjust risk. Some of the common methods include percentage-based allocation, equity-based proportional copying, and risk-based allocation.
Look for a service that allows you to control how much capital is allocated to a strategy. The copy trade service should include features that let you adjust maximum allocation, stop-loss and take-profit orders, and maximum drawdown limits.
Compare Fees and Other Trading Costs
The advertised cost of a copy trading service may not represent the complete cost of using it. On the other hand, the best forex copy trade service doesn’t have to be the most expensive.
Potential fees for using a forex copy trade service may include subscription, performance, and withdrawal charges. When comparing volume forex broker copy trade platforms, consider the total cost of using the service, rather than focusing on the advertised fee.
Even if you are using one of the best copy trading brokers, don’t overlook other relevant costs such as spreads, swap fees, and commissions.
Understand the Trading Strategy
The goal of copy trading isn't just to copy trades without understanding what's happening behind the scenes. Each trading strategy will behave differently under changing market conditions, and it is important to know the basics.
If a signal provider gives little information about their trading methodology, be cautious. Chances are you won't be able to know what went wrong if the signals you copied end up in losing trades.