Don't copy other traders!
- 2006
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Novice traders often try to copy traders they admire or think are performing well. This is an easy way to try to generate gains quickly in trading but eventually, it always ends in the loss of capital.
To copy a trader, you can either go to a copytrading platform or consult the various analyses that are published free of charge on the net (as is the case for example on Centralcharts).
Knowing that all novice traders are attracted to the practice of copytrading, a lot of brokers have opened their own platform. This is the case, for example, with the broker Etoro (with Copytrader) and Avatrade (with Zulutrade). You only have to look at the number of registered traders to see that it is a hit with novice traders.
What attracts these novices is obviously the performance. The so-called "best traders" are put forward, with performances of several hundred percent over the year. For a trader's profile to appear in the list of traders to follow they need to have achieved at least several dozen percent increase.
Don't fall into that trap! Don't succumb to greed! These unrealistic performances always hide non-existent or very badly constructed risk management. So yes, this can help you to win on some trades but in the long run, everyone who copies these traders ends up with a zero trading account.
When I see that the trader most highlighted at Etoro (and validated by the site) has a drawdown of 50% daily and 72% weekly, it sends shivers down my spine! The trader certainly makes 600% in the year but if you get there at the wrong time, you can lose 50% of your capital in one day. If there are two negative days in succession, then you won't have much left.
The problem with copytrading comes from the principle itself. If a trader wants to attract followers to his trading account, he must necessarily take ill-considered risks to generate maximum performance. Otherwise, novice traders would never be interested in him. To keep his followers, the trader must subsequently continue to take risks to maintain his performance and he will therefore use enormous leverage (leverage = risk! the greater the leverage, the greater the risk!). On some copytrading platforms, some traders simply don’t put any stop loss on their trades. This way, the result of these trades is not taken into consideration in the account’s performance. A good way to boost its performance!
At the end of the day, the trader ends up razing his trading account by taking too many risks. The big loser in this tale is you. The broker will have collected commissions from him on each trade on his platform and the trade you have followed will have filled his pockets by having a maximum number of followers (the broker will pay him part of the commissions received).
I suggest that you read: Etoro, a cash machine except for traders
Trading and analysis are two different activities. Of course, one cannot be done without the other, but a good analyst is not necessarily a good trader and vice versa.
A good analyst is a person who can determine good entry levels, find key thresholds and knows how to determine price objectives.
A good trader is a person who earns more than he loses in trading. In other words, a person who applies good risk management,allowing him to minimize the amount of his losses on losing trades. A good trader will also exploit these winning trades well to generate maximum profits.
When you consult analysis on the internet, the analyst usually determines an entry level and possibly a price objective and a stop loss. But be careful, the levels they indicate are not necessarily those on which he will exit a position. During his trade, a trader may decide to take his profits early (seeing a weakness in the movement) and move his stop loss to reduce his risk and then quickly protect his gains. The analyst does not indicate all this.
Result, if you followed his analysis and carried out the trade, you may have a totally different result from his in terms of performance. You may even lose when he wins. This is often what happens because it is rare that the scenario unfolds as expected and it is therefore management during the trade that makes the difference between a winning and losing trader.
Analysis you find on the net should only be used to identify key levels, that's all! Novice traders often believe that copying the trading ideas of good analysts will let them be winners at trading. That is totally false. The only thing that will make you money is managing your risk well and covering your losses with your winning trades. And management during the trade can’t be copied, each trader has his own way of working (through his experience, his trading strategy, his investor profile, etc.).
Copying a trader will never make you money in the medium/long term. Forget about copytrading unless you want to raze your trading account. You can use analyses that you find on the net, but use them wisely! They are trading aids, tools that can be very useful, but not what will make your trading win. If you want to make money in the financial markets, you will have to work hard and the key to success lies in risk management, much more than in the trading strategy itself. I can tell you right now that it will take you several years before you get there. Are you ready to become a good trader?
To copy a trader, you can either go to a copytrading platform or consult the various analyses that are published free of charge on the net (as is the case for example on Centralcharts).
Copytrading: Everyone wins but you
Knowing that all novice traders are attracted to the practice of copytrading, a lot of brokers have opened their own platform. This is the case, for example, with the broker Etoro (with Copytrader) and Avatrade (with Zulutrade). You only have to look at the number of registered traders to see that it is a hit with novice traders.
What attracts these novices is obviously the performance. The so-called "best traders" are put forward, with performances of several hundred percent over the year. For a trader's profile to appear in the list of traders to follow they need to have achieved at least several dozen percent increase.
Don't fall into that trap! Don't succumb to greed! These unrealistic performances always hide non-existent or very badly constructed risk management. So yes, this can help you to win on some trades but in the long run, everyone who copies these traders ends up with a zero trading account.
When I see that the trader most highlighted at Etoro (and validated by the site) has a drawdown of 50% daily and 72% weekly, it sends shivers down my spine! The trader certainly makes 600% in the year but if you get there at the wrong time, you can lose 50% of your capital in one day. If there are two negative days in succession, then you won't have much left.
The problem with copytrading comes from the principle itself. If a trader wants to attract followers to his trading account, he must necessarily take ill-considered risks to generate maximum performance. Otherwise, novice traders would never be interested in him. To keep his followers, the trader must subsequently continue to take risks to maintain his performance and he will therefore use enormous leverage (leverage = risk! the greater the leverage, the greater the risk!). On some copytrading platforms, some traders simply don’t put any stop loss on their trades. This way, the result of these trades is not taken into consideration in the account’s performance. A good way to boost its performance!
At the end of the day, the trader ends up razing his trading account by taking too many risks. The big loser in this tale is you. The broker will have collected commissions from him on each trade on his platform and the trade you have followed will have filled his pockets by having a maximum number of followers (the broker will pay him part of the commissions received).
I suggest that you read: Etoro, a cash machine except for traders
Do not follow analysts blindly
Trading and analysis are two different activities. Of course, one cannot be done without the other, but a good analyst is not necessarily a good trader and vice versa.
A good analyst is a person who can determine good entry levels, find key thresholds and knows how to determine price objectives.
A good trader is a person who earns more than he loses in trading. In other words, a person who applies good risk management,allowing him to minimize the amount of his losses on losing trades. A good trader will also exploit these winning trades well to generate maximum profits.
When you consult analysis on the internet, the analyst usually determines an entry level and possibly a price objective and a stop loss. But be careful, the levels they indicate are not necessarily those on which he will exit a position. During his trade, a trader may decide to take his profits early (seeing a weakness in the movement) and move his stop loss to reduce his risk and then quickly protect his gains. The analyst does not indicate all this.
Result, if you followed his analysis and carried out the trade, you may have a totally different result from his in terms of performance. You may even lose when he wins. This is often what happens because it is rare that the scenario unfolds as expected and it is therefore management during the trade that makes the difference between a winning and losing trader.
Analysis you find on the net should only be used to identify key levels, that's all! Novice traders often believe that copying the trading ideas of good analysts will let them be winners at trading. That is totally false. The only thing that will make you money is managing your risk well and covering your losses with your winning trades. And management during the trade can’t be copied, each trader has his own way of working (through his experience, his trading strategy, his investor profile, etc.).
Conclusion
Copying a trader will never make you money in the medium/long term. Forget about copytrading unless you want to raze your trading account. You can use analyses that you find on the net, but use them wisely! They are trading aids, tools that can be very useful, but not what will make your trading win. If you want to make money in the financial markets, you will have to work hard and the key to success lies in risk management, much more than in the trading strategy itself. I can tell you right now that it will take you several years before you get there. Are you ready to become a good trader?
