Discover how to mirror successful investment strategies through copy trading and how to do so through eToro’s CopyTrader capabilities.
Investing is growing as a way to own and create more income, even in the mainstream. The advent of the internet age made investing accessible to every Joe Bloggs with a little spare cash and time, no matter their background, income, or expertise. There is also now access to infinite information on markets in real-time, as well as stock history and market predictions; there has never been a more well-informed era of investment. Now, statistics show that private individuals own 12.4% of the company stock held in the UK; investment and trading are always growing and can be lucrative to anyone.
Investment can be a brilliant way to make a passive income without a considerable amount of time or effort. However, as any long-term investor will tell you, it’s not as easy as merely opening an account and watching your portfolio grow. There are more steps to take to ensure your portfolio is as strong as it can be, to maximise profit while simultaneously minimising risk. Obviously, with all investing, there will always be a degree of risk whereby you may lose the money you have invested. If you cannot afford to lose the capital you invest, it is better to wait until you can mitigate that risk in order to ensure you don’t get into any financial difficulty.
Making the right stock picks is hard. That’s why strategies like copy trading have become so popular over the last number of years. By copying another trader with more expertise, you eliminate the need for spending months researching the market before you make your first trade.
To learn more about what copy trading is and how to execute it profitably, keep reading.
What Is Copy Trading?
Copy trading (a similar system to social trading) is an investment strategy that involves tracking the investment moves of successful professional investors. When they buy, you buy; when they sell, you sell. You essentially mirror their investments proportionally.
You don’t have to invest the same amount as the person whose strategy you’re copying. Instead, you will trade the same percentage of your portfolio as they do in each transaction. If, for example, your entire copy trading portfolio is $500 and the person you’re copying from has a portfolio of $50,000, you will invest $1 for every $100 they invest. This means that trading becomes more accessible to mainstream users, as you can copy them in a way that suits your budget, but still maximises profit.
The benefits of this system are obvious. Instead of making rash investment decisions yourself, or spending a huge amount of time researching various strategies and security profiles, you can just piggyback on the success of a pro. On eToro, you can search for traders using a series of filters in order to find a trader that best suits your needs; there is not a one size fits all approach to investing. You can take time to decide whether you would like to choose a higher risk investor or a lower risk investor that may bring income more slowly.
You can allocate your entire portfolio using this strategy, or just a given percentage of it. There is endless flexibility on eToro to make investing work for you and your needs.
What Is eToro?
EToro is a platform for copy trading and is one of the most popular platforms of its kind. It allows you to sign up, make your initial deposit and pick the trader whose investments you want to track. This feature is one of the more widely-used on eToro, unlike other platforms.
You can invest anything from $200 to $500,000 per user. eToro makes investing accessible, with a low minimum and great opportunities for anyone and everyone to make money. You can track as many as 100 users at a time in order to develop the best portfolio possible. One way that you could create a good portfolio is by mixing the traders you invest through, as well as making your own trades, to maximise your available profit.
If there’s a certain position that your tracked user invests in that you’d prefer to avoid, you can make this change manually on the site. This is just one more feature of eToro that makes it flexible and accessible for all users regardless of their previous experience or understanding! As you begin to understand the market and find your feet with investing, this is a great way to make those first baby steps towards your own individual investing strategy.
How to Make Money Through Copy Trading
Copy trading might sound simple and, for the most part, it is. However, to really maximise its potential for your portfolio, there are a few things you need to bear in mind.
Your risk appetite is the most important thing to consider when choosing any kind of investment. You need to make sure that the person you’re copying from has similar investment goals to you. If you want to create a steadier, but lower, income, then a portfolio that is lower in risk may be better. For example, if you’re trying to gradually build your savings for, say, retirement, you don’t want to copy someone who takes a lot of risks when buying securities. Similarly, if you’re trying to make as high a profit as possible and you’re willing to accept a lot of risks, you want to avoid copying traders with low-risk goals. This will lead to higher profit, but also the potential for more costly losses.
Tracking Investment Gurus to Maximise Your Returns in 2020
Making good investments consistently is a very difficult thing to do. Even top professional investors make costly mistakes now and again. It is important to remember this when you choose an investor to copy; they are likely to make mistakes sometimes, and this is okay. Just pay attention to how often they make mistakes, and how costly they are. If they are consistently taking heavy losses, then it may be time to consider a change.
However, a solid copy trading strategy will see you make excellent returns in the long run. The key is to follow the right leader and to have faith in your strategy over an extended period. You should also keep a diverse portfolio to minimise risk.
If you want to learn more about how to leverage this strategy in your own investments, find out more today.
Thinking of Investing or Trading? Why not just copy professional traders!
My name is Joseph Moricca, I run Velox Investments and I am an Investor on eToro. I have used eToro for a number of years but did not realise the potential to make a solid return consistently until I started copy trading! If you want to find out how to make money online then read my Beginners Guide to trading on eToro. To start, Sign up to eToro through the link below and take advantage of the free demo account!
Other Useful Links for learning
- eToro Trading Academy
- Market information: The Motley Fool, The Economist, The Financial Times, Zero Hedge
Disclaimer: eToro is a multi-asset platform which offers both investing in stocks and cryptoassets, as well as trading CFD assets.
Please note that CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.
Cryptoassets are volatile instruments which can fluctuate widely in a very short timeframe and therefore are not appropriate for all investors. Other than via CFDs, trading cryptoassets is unregulated and therefore is not supervised by any EU regulatory framework.
This guide is intended for educational purposes only and should not be considered as investment advice. The author and publisher are not liable for any losses or damages you may incur as a result of you following the advice given on this page. The etoro.com layout and content may change since this content was published.