The Goods and Bads of Copy Trading

Among the newest features showing up in many binary options platforms is a tool which allows traders to follow and replicate the trades taken by others who use the same platform. The potential benefits of such a tool are many, yet there are also a few drawbacks which need to be taken into consideration. Consider the following before making a decision with regards to whether or not to copy trade within your trading platform.
Social Trading
Social trading in not an entirely new concept, as traders have been exchanging information about their investment activity for quite some time now. What is new and different is the ability to replicate the trades taken by successful traders with which you are not acquainted. Furthermore, most brokers have automated this process, allowing copy-trades to be opened automatically, with very little action required on the part of the trader. Often, time periods for following can be set in advance, but these should be adjustable should the desired results not be provided.

The benefits are quite clear, as such a tool may provide more profits while reducing the time commitment associated with trading binary options. Each individual can select which traders to follow, and the feature can be adjusted and turned on and off at will. Acceptable investment amounts can be pre-set, preventing the system from ever selecting an amount that is higher or lower than desired. Investment minimum and maximum requirements must be met, but aside from these, the trader is in complete control.

The cons are few, provided that your broker is trustworthy. Having said that, there is plenty of transparency provided when using this feature. The success rate and past actions of the traders being followed should be provided. This information can be used to decide who to actively follow. This information will also allow adjustments to be made along the way. If the aforementioned details are not provided, you’ll need to carefully consider whether or not you wish to blindly follow the actions of others.

Within some platforms, social trading is not automated, requiring that trades be taken manually. This can be a good thing in that a greater level of control is provided. On the other hand, since the process is not automated, there will be more of a time commitment involved in the process. Lack of automation may also allow for problems which are associated with emotion. Trade selection can be tough at times, and may be even tougher when emotions are controlling the decision making process.

Not every broker offers copy trading, but those which do may offer it in a format not described in this article. As such, it will be important to learn exactly how to use this feature if it is provided within your chosen platform. This applies to all optional features, as each broker is allowed to determine the rules surrounding its use. Many common problems can be completely avoided by taking the time to learn how to use the features provided by binary options brokers in advance of actually using them.