Copy trading Isn't Just Follow The Leader
Copy trading binary options is gaining popularity, that is without a doubt. The benefits of following another more successful trader are obvious, what is not obvious are the things you should be on the lookout for when choosing someone to follow.
The Latest Trend In Binary Options
Many brokers are adding a new feature; copy trading. This is the practice of following the lead of other traders, traders who are presumably more experienced than you. On the surface this may seem like a good idea, and it is, but what lurks below the surface is often the same scams that have plagued binary options from the very beginning.
It's too easy for shady brokers to create fake traders in the same way the create signal service providers and other “free” services designed to lure in unsuspecting traders. This does not mean that all copy trading is a scam, only that you should be aware of the pitfalls before you commit to a broker or a trader.
This is my list of tips for what to look for when choosing a copy trader; it is a comprehensive list and one that can be applied to SSP's and social trading too.
Some Tips On How To Choose A Copy Trader
Finding The Right Broker – Trading binary options successfully always relies on finding the right broker. Not all brokers offer copy trading and not all copy trading is the same. The first step is finding the brokers that have the best platforms for copying, the second is choosing the best of those.
When choosing make sure that the broker is popular and has enough traders to provide plenty of opportunities for you. One thing I have discovered is that there are some great platforms that just aren't getting enough traffic to make them worthwhile. You can click here to learn more about the types of copy trading.
Choosing A Trader – Once you choose the platform the next step is choosing a trader to follow. The very first criteria you will want to check is the win rate. The higher the win rate the more likely you will be able to profit from their trading. The caveat is that win rates can be manipulated and don't always reveal the whole truth so it is useful to check some other information as well.
Trading History – Win rates are well and good, you definitely want to follow only the best traders but being best is relative. After checking the win rate the next thing to look into is the trading history. Not all platforms provide the same details but you should be able to get a gist of whether this person has traded hundreds of times, dozens of times or only a very few times.
A win rate of 70% with only 10 trades does not quite mean the same thing as a win rate of 65% after 500 trades. Add three losses to the first scenario and you rate drops to the profitability line of 54%; add three losses to the second scenario and your rate will fall by less than a half percent.
Profiles And Forums – By this point you should have a list of 5 or 6 potential traders and be ready for a little deeper digging. Profiles and forums are the way to do this. These are places where the trader can provide information about themselves and their style of trading and where you as a copy trader can get to know them.
It is also a way to help weed out potential scams; if you can't find a real person to talk to do you really need to be copying them?