How Copy Trading Works?

Answer 1

In copy trading, this copies the trades of experienced investors automatically, allowing one investor to follow them. This method has gained popularity as it minimizes the complexity of trading for novices or busy investors, making it possible for such investors to reap knowledge and strategies from seasoned professionals without undertaking extensive market analysis.

How to use copy trading

1. Selecting a Trading Platform

To begin with, investors have to select a service that provides a copy trading feature. Services like Zerodha, through third-party services such as Combiz Services Pvt Ltd, enable copy trading by linking up the user's brokerage account. The services offer a list of expert traders whose records can be seen in case the person wants to copy them.

2. Choosing whom to copy

Once you have access to a copy trading platform, you need to choose a trader to copy. Platforms allow you to see performance data for each trader, such as:

 

• Profitability
• Risk level
• Trading frequency
• Asset types traded

You can use filtering and selection criteria to choose traders based on strategies that align with your financial goals, risk appetite, and asset preferences.

3. Setting Your Copy Parameters

Once you pick a trader, you will need to set up the amount of capital you want to commit to reproduce their trades. Most trading platforms allow for trade sizing on a budget basis, so you can participate in the strategy without overcommitting your resources.

In addition, most of the platforms, including those provided by Combiz Services Pvt Ltd, have risk-management means. Some examples are stop-loss limits where you can set any prespecified rules, which would stop the copying in case the losses exceed a certain percentage. This is just another layer of security.

4. Real-Time Trade Replication

Once set up, the copy trading platform automatically replicates the actions of the trader chosen in your portfolio in real time. If the expert trader opens, closes, or varies a trade, the same occurs in your portfolio.

For instance, in case the trader purchases an equity stock, the same equity stock is purchased in your account in proportion to the amounts you've allocated. When they close a trade, the system liquidates the asset for you.

5. Monitoring and Adjusting

Since copy trading works automatically, you can follow performance through the platform's dashboard. You will have the choice to:

• Pause copying
• Withdraw funds
• Change to another trader if required.
• Avoid duplicating some trades or closing a given position manually.

This way you will be in control of your finances, but you will get the benefits of automated trading.

6. Commission and Charges

Most copy trading services charge a small fee or commission while making use of the service, which may be charged as part and parcel of the overall charges of the platform or subtracted from your profits. The system varies depending on the platform and the broker.

Conclusion

Essentially, copy trading simplifies the investment process, as you are just mirroring what other successful traders in the market are doing. You can connect to platforms like Combiz Services Pvt Ltd, which integrate with brokers like Zerodha, allowing you to participate in the market much less in stress and learning as they go along with the management of your risk.