How to Choose the Right Trader for Copy Trading

 

How to Choose the Right Trader for Copy Trading

Copy trading provides one of the simplest avenues for novices to enter the trading markets without in-depth technical knowledge. Copy trading lets you compile the trades of experienced traders using a copy trading platform or copy trading app to allow a beginner to learn and earn simultaneously.  

However, your success in copy trading boils down to one thing – choosing the correct trader to copy. Choosing a quality trader requires research, monitoring their trades, and your own risk tolerance. We're now going to review how a trader can wisely select the right trader and slowly build their portfolio via the use of a copy trading platform, such as Combiz Copy Trading Software.  

1. Evaluate the Trader's Performance History  

When selecting a trader, the trader’s performance history is the best indicator of their consistency and skill. Don't just fall into the trap of short-term profits or attractive rates of return. Look for traders that have steady and consistent gains for more than a year.

  • Look for consistency: A steady and steady increase in profits is better than unpredictable and sporadic increases. 
  • Check drawdown levels: A drawdown above 30% suggests a risky trading approach, and anything under 20% indicates good risk management.
  • Analyse trading frequency: Trade frequency can provide you information about a trader's style -- high-frequency scalping or a longer-term hold.
  • Understand profit factor: This ratio of total profit to total loss explains how well a trader is turning winning trades into profit. 

Dependable traders are not necessarily the ones making the highest returns in a month; they are the ones that have a long history of producing stable returns. 

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2. Match Their Risk Level to Your Comfort Level

Even the best trader could be an incompatible match for your financial goals based on their level of riskiness. Before adopting someone else's process, please consider your own risk tolerance.

Many copy trading platforms publish a risk score that indicates how comfortably or aggressively the trader uses leverage or manages losses. A lower risk score indicates a trader who is conservative, and a higher score indicates a trader who is a risk-taker.

You can use this to structure your exposure to trading. You may want to allocate more capital to low-risk traders and limited capital to high-risk traders. You may be comfortable with a conservative or risk-seeking ethos.

3. Understand Their Strategy

Avoid simply becoming a copy trader by blindly mirroring someone else's trades. A professional and ethical trader provides a clear explanation of their trading strategy and approach.

  • Do they practise day trading, swing trading or positional trading?
  • What kind of assets do they trade: equities, indices or commodities?
  • What is their approach to dealing with market downturns?

The best traders will remain emotionless and stick to their trading approach even when they take a hit. You can see this discipline when looking at their trade history and trading performance, using the copy trading application you use.

4. Transparency and communication matter

Decision-making takes trust in copy trading. Choose traders that provide publicly available, full historical and verified stats of their trading activity. Many copy trading software solutions, such as Combiz, provide users with full transparency of a trader's performance statistics, including win rates, drawdowns and real-time analytics.

Check community reviews and other posts from other users, as a good trader will engage in overt communication with their following, especially during volatile market conditions and drawdowns.

In the end, check whether the trader uses real funds or a demo account. Automated traders will take considerably stricter measures when it's their own money.

5. Follow Best Practices for Long-Term Success

Even after you successfully select a trader, your work is not done. To fully maximize a copy trader, follow the best practices.

  • Diversify your portfolio: By copying several traders with varied strategies and instruments, you spread your risk out.
  • Small amounts to start: Always best to start small to watch the performance.
  • Monitor often: Keep an eye on your copy trading account and stop copying a trader if their strategy or trading changes.
  • Risk Controls: Use stops, or whatever capabilities exist in the software could help protect your capital.

Combiz Copy Trading Software and similar platforms offer a practical way to access these functions, which allows you to automate trades and at the same time keep your control.

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Conclusion

Choosing the right trader for copy trading is not about a trade that made you money quickly – it's about finding consistent performance, transparency, and operating under a strategy that is aligned with your financial goals. Take your time to evaluate and monitor performance, risk and communication protocol before giving access to your capital associated with your credentials.

A trustworthy copy trading platform like Combiz provides you with the technology, analytics, and automation to enable you to adequately select the right trader with confidence. Remember, a copy trader is not only about the trader you copy, it’s remaining up-to-date, balanced, and focused on the long term to compound your investments.

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