Copy trading is becoming increasingly popular in India for both novice and seasoned investors. Thanks to the advent of internet trading sites and social media impact, many are opting for copy trading to make money out of the stock market despite not having thorough knowledge about it. The major concern here is, "Is copy trading a legitimate form of investment or yet another scam?"
Copy trading is a form of investing whereby you replicate the trades of a different trader. It implies that once a selected trader engages in buying and selling stocks, forex, or any other type of security, you make the same trade through your account.
It is similar to mutual funds and ETFs except for the fact that the fund manager operates within defined regulations in the former. This is not the case in copy trading since you depend entirely on the trader's discretion.
The rise in popularity for copy trading in India has been influenced by simplicity and the chance of generating income without much effort. The idea of copying a seasoned trader has made many newbies comfortable about venturing into the market without having to learn everything about it.
Worldwide, it has been reported that about 20% of the total trading volume from some offshore CFD brokers comes through copy trading. In addition, social media sites have been playing a huge part in encouraging copy trading even without the necessary regulation and verification.
Copy trading can be profitable, although there is no certainty about the profits generated from such trades. The profitability of your trades will depend solely on how well the trader you are following performs. There will be instances where even the top performers lose money, especially in poor market conditions.
Traders tend to perform very well in bull markets due to high demand for certain stocks or sectors. When the market experiences bearish trends, profitability may be difficult.
However, there are also dangers involved in copy trading that every investor must consider. A lot of fraudulent schemes have been marketed over social media where people project an extravagant lifestyle.
This type of scammer usually claims to give free copy trading services but earns commissions from directing customers to brokers who are not regulated. Sometimes, the motive may not necessarily be to make money from investments but to ensure that there is trading activity or deposits.
In addition, such platforms can be untrustworthy in terms of transparency regarding performance results and risk exposure.
Yes, it is safe to engage in copy trading if one uses the correct platform and exercises proper risk-management techniques. Unlike SEBI-regulated investment programmes, copy trading services are not always regulated.
Investors must use platforms which are reputable, transparent and provide proper risk controls. It's never advisable to invest in any programme that guarantees profits.
Combiz Services Pvt Ltd provides state-of-the-art copy trading technology to our clients to enable successful trading.
Copy trading in India cannot be considered a total scam, nor can it be guaranteed to make profits. This is a very risky investment system that should be used wisely.
Success in copy trading is possible only when one is aware of everything and uses the right strategies. This involves doing thorough research before investing.