Top 10 Copy Trade Forex Rules To Follow To Ensure Profit
Most people who get into forex trading will find themselves losing money. That is because forex trading is not the get rich quick scheme that some self-proclaimed forex trading gurus make it look like on their YouTube videos. With all the tutorials videos and ebooks on forex trading that you will find on the internet, knowing which strategies are actually profitable is next to impossible. Luckily, copy trade forex or social forex trading is fast gaining popularity.
Learning how to trade forex can be very daunting. The mere sight of a typical forex trading platform such as CTrader or MT4 is usually enough to turn people away from even beginning to study how to trade forex. Luckily, there is an easier way to get into forex trading and if done correctly, becoming profitable can be as easy as to simply mirror traders who have already done the heavy lifting, put in the many hours studying charts and technical indicators, as well as testing and backtesting forex trading strategies.
The good thing about copying someone else’s live trading account is that you can be sure that that person is going to do his/her best to be profitable because he is trading his own money. You’re just copying his trades. If you lose, it means that he has lost money as well. It’s mutually beneficial or a mutual assured destruction type of relationship between you and the copy trading forex strategy provider.
Here are the top 10 copy trade forex rules you can follow to ensure that you do not lose money by following copy trade forex scams.
Never Copy From A Demo Forex Trading Account
This is the most obvious rule of all. If the strategy is being traded on a demo account, then the trader doesn’t really have anything to lose. So he can experiment to his heart’s content without fear of losing his own money. Bottomline is, if the trader is not sure enough about his own strategy to put his own money into, it’s best you do the same and not put your own money into his strategy as well.
Check Overall Trading Performance
Popular forex copy trading platforms have some sort of rating system that allow you to see the trade history and performance of forex copy trading strategy providers. Before you can check them out though, you must first know what exactly you should be looking out for, so you can make an informed choice of which forex social trading provider you would copy from. This is the most important factor that would guarantee your success and profit as a forex copy trader. How good a trading strategy is, can be seen when you check the account’s trading performance such as its All-Time ROI and profit in pips. These information can be seen on top of the CTrader Copy account that provides copy trading strategy to the public. Other data to consider would be the forex trading strategy’s Net Profit, Profit Factor, Percent Profitable and Max Balance Drawdown. You should also check its total number of trades as well as its losing and winning trades percentage. These trading performance indicators can tell if you if the forex trading strategy you are checking out is worth copying.
Copy Trade Forex Strategy Age
This refers to the age of the strategy and not the forex trading account itself. Any forex trading strategy worth copying must show consistent profits and consistency comes with age. Any strategy that is less than 3 months old may not have had enough activity to fully test the strategy. Regardless of how much profit or ROI a trading account shows, if it’s not at least 3 months old, it is probably too early for you to be copying from and risk losing your money.
Understand the Conditions of the Strategy Provider
Traders who offer their copy trading strategy on CTrader copy can set conditions that are required for someone to start copying their strategy. These are the following;
- Minimum Investment
- Performance Fee
- Management Fee
- Volume Fee
The minimum investment requirement is self-explanatory. The 3 fees mentioned are all the ways that a copy trading strategy provider can earn from those who copy his trades with a live (not a demo) account. You need to play close attention to all these fees because it would have a direct impact on your profit as a forex trade copier. As a rule of thumb, if the total fees deducted from you is over 50% of the profits made, it’s probably not a very good arrangement to be entering.
Popularity of the Forex Trading Strategy
The more copiers a strategy provider has, the more popular his forex trading strategy is. Logically, people would only copy from profitable live forex trading accounts. So a quick way to know if a strategy is worth copying is to see how many copiers it has currently. The caveat to this though is that CTrader and other forex social trading platforms right now, allows for the strategy provider to copy his own strategy with all his accounts. So bloating the number of copiers is as easy as creating as many demo accounts as possible and simply set all those to copy from your own strategy.
Check the Account Summary
When you view a strategy on CTrader Copy, you will see a section under “Summary”. Pay very close attention to the information provided there as it is crucial to understanding the viability of the forex trading strategy. Pay special attention to the number shown on Profit Factor, Percent Profitable and Max Balance Drawdown. Double digit profit factor is always a good sign of a profitable forex trading strategy. Couple that with at least a 70% value for Percent Profitable and a Max Balance Drawdown that is below 40% and you can say that you are looking at a real candidate for choosing which copy trade forex strategy you would invest your money in.
Verify Trading Performance Stats
Under the Performance Stats section, you will see trading statistics including total trades, winning trades, number of long and short trades and their corresponding percentages. A quick rule when it comes to assessing this information is that a trading account must have executed at least 100 trades and have achieved your desired profitability. Any forex trading account that has not had at least 100 trades under its belt has just not been tested enough by the market.
Analyze Trading History
Does the forex trading account show consistency in terms of trading patterns or does it show too many forex pairs being traded? Is there a semblance of an actual strategy? This is normally seen when an account’s trading history shows that the trader trades the same pairs majority of the time. Does he make good use of a stop loss or does he have a different approach to loss management? How long is the average holding time of his positions? Is he a scalper who trades the lower time frames or a swing trader?
Look For Anomalies
If there is something that looks off, be extra mindful. Copy trade forex strategy scams are quite easy to spot if you know what you need to look out for. For example, I oftentimes see live trading accounts on CTrader copy trading platform that have a starting balance of only $1 but then you would see that the total deposits are in the hundreds of dollars. This allows the forex strategy provider to bloat their trading account’s ROI. Stay far away from forex strategy providers like this because they are guaranteed as a forex trading scam.
Another thing to look out for is how a forex copy trader strategy provider, who charge per volume traded. The scam here is that once they have enough number of live (not demo) account copiers, they would take many and massive trades with no regard for results. The rationale behind this scam strategy on CTrader copy is that they will make more commission from the volume of trades copied than the loss their account would incur. One safety tip I can give you if you want to start copying forex trades from someone, is to never copy from a strategy provider who charges per volume. Those who only charge based a performance fee, is the best forex strategy provider to copy from.
Check with the Forex Trading Community
Ctrader has a very responsive and helpful community. Simply join the CTrader forum and do a quick search for the strategy name or the CTrader ID you want to copy from. If there is nothing about them on the forum, then you can ask the members there, what they think of the strategy provider, before you invest your money into copying from that provider. You can also search for an join Telegram groups related to forex trading. I personally am in the CTrader Copy (Unofficial) and CTrader Community groups in Telegram.