top of page
Search

Copytrading is not trading, it's gambling

Many traders have asked the question whether copy trading is profitable.

The differences in opinion are as extreme as the results generally obtained.

Yes, it can be very profitable. The exponential increase in this activity would not have occured if there were no success stories.


However, most people will lose!


This is for a variety of reasons, the main one being the flood of bots and EAs (Expert Advisors) built and offered by unqualified providers looking to capitalise on the allure of easy money offered by algorithmic trading. It has become extremly easy for anyone with limited technical or financial markets knowledge to create scripts that generate impressive backtest results which falsely allude to the discovery of some profitable market dynamics/patterns which will thereafter make their users untold wealth.

Why else would there be an influx in proprietary trading shops and "investment" managers who have no finance or market analytcis background, disporportionatly coming from digital marketing backgrounds and offerring FTMO type services. Anyone who can build a sexy website with a few "faces for hire" embedded as consultants can establish what appears to be a credible trading organisation. Likewise anyone with minimum programming knowledge, or without the prerequisite years of quantitative finance and statistics education, can pass themselves off as algorithmic or quantitative developers and start selling bots or trading signals.



Many people 'advise' that you should only copy strategies that have had a track record spanning years. This is doable if you are very patient and are willing to tolerate long periods of possibly large losses and significant drawdown. Similar to an investment timeframe. Unfortunately leveraged retail forex is not classified as investing.For most traders looking to copy active traders this long-term commitment to weathering a long period of unprofitable trading is not appealing. Like most gamblers, they want immediate stimulation.


Technically, Copytrading cannot even be classified as trading, you are in fact actually gambling. Picking the best trader to control your account is no different to picking the best horse at the racetrack.


Rules

------


Look at the EQUITY of a track record, not the BALANCE. Anyone can hold losing trades forever, only closing out those trades that are profitable and creating an impressive parabolic balance returns chart. The floating equity at any point in time is what matters to the broker when they margin call you or you need to make a withdrawal. If the leverage of your account is smaller than that of the traders account, your broker will likely start autoclosing positions on your account whilst the copy source remains unnafected. Especially if you increased the risk by copying at sizes greater relative to the traders size. You may also not be able to mirror the trades because you have insufficient funds available to take any additional trades


For example, if you are copying someone with a $1000 account of...


Be aware that strategy verification sites create the equity plot based off the value at the END of the day. It might not show how large your traders floating loss was during the day. Additionally, you WILL get spikes in equity, up or down, over news events.


Ignore anyone who shows videos of themselves in fast cars, planes or helicopters. Unless they are actually flying the plane themselves, solo as a licensed pilot, which indicates a degree of competence, commitment and perserverence, they are probably pretending to be someone else for a couple of hours for promotional appearences.


Ignore anyone who guarantees ANY type of positive return. Trading forex it is impossible to provide any type of assurance that you will generate a known return in a given time period.






That being said, there


30 views0 comments

Recent Posts

See All

test

Comentarios


bottom of page