Foreign currency trading is a very lucrative investment option, but the inexperience and lack of knowledge in foreign currency trading makes beginners a little apprehensive about the whole affair. They fumble when it comes to opening and closing trades in the market. Also, they are unable to tell the high-earning positions from the unprofitable ones.
Using a trade copier might be the best option for most beginners until they get a deeper insight into the working of the Forex market and are able to trade independently. In fact, trade copier softwares have become so popular that they are being considered a necessity for successful trading rather than an optional tool to be taken only by those who need help.
To understand how a trade copier works, it will help to first understand how copy trading works.
What is Copy Trading?
Forex stands for Foreign Exchange. Forex enables investors to earn by speculating on the value of currency. Copy trading is an investment strategy used in Forex trading. It involves copying trades or trade decisions made by other investors. This other investor is generally a seasoned investor or one who has a reputation of generating consistent profits in the marketplace. The system is based on a kind of social trading network and the person whose trades you copy is a mentor.
The process of Forex trading starts with setting up an account with a broker. If you choose to copy a trade, a fixed amount of your funds get automatically linked to the account of the investor whose trades you intend to copy. Each time the investor trades including opening or closing an option or issuing a stop loss order, your account will copy the movements in proportion to the amount of money linked to the account. Every time the trader profits, you will profit and every time he loses you will lose. The system allows you to profit significantly by not restricting you to a single account; you can link it to different traders’ accounts.
Copy trading differs from mirror trading in the fact that the latter allows you to copy on specific trade strategies and not all. In copy trading, you can copy an entire strategy or mirror individual trades only; the choice is yours. The option of copying several accounts is a better option as it helps mitigate risks. The trade copier software allows you to stop copying other’s trades and starting trading independently whenever you want. You can close the copy relationship altogether.
Copy trading can be done manually or mechanically. There are specially designed trade copier software programs to enable it to be done mechanically. Its ability to copy an indefinite number of accounts gives you all the information you need to take sound trade decisions. Also, it has integrated several other tools to maximize profit and minimize risk.
Local vs. Remote Trade Copier Software
Trade copier software is of two basic types. The first one is remote while the second is local. The two differ on various grounds. A local version is used primarily to trade between many different accounts, between account managers and also by retail managers trading with multiple brokers. This exposes one to a greater number of trades thereby increasing the earning potential. This software generally operates on a local network.
The remote trade copier permits trades between multiple accounts. It is a fully-automated solution and the trading is conducted from a remote server or machine. In today’s times, the remote version has become more popular because it is more sophisticated and highly reliable. It also allows for high speed trading. Being fully automated, it reduces the workload for managers and traders who can then rely on automated signals.
How does Forex Trade Copier Software help?
When the concept of copy trading was introduced, it was believed that it offered the most benefits to account managers and not much to retail Forex traders. This is not what it actually is. The software program can be used by account managers and retail Forex traders.
There are several benefits of using the trade copier software. The software converts vital trade data into an easier format and copies it to different accounts simultaneously. Since the process is handled by computers, it eliminates the need for human effort. Imagine the amount of work that would have gone into it if the same process was done manually. It also saves a good amount of time. Even if you are a full-time trader and are quick at replicating trades, you might not be able to do it as efficiently as the program because after all manual processes are prone to mistakes.
When you copy trades, as an investor you can capitalize on another investor’s ability to predict market movements. It enables an investor to manage his or her money more effectively by distributing it profitably. Trade reversal is another advantage of using the trade copier. If you think you are going to lose on a particular trade you can reverse it that is you sell when the trade is buy and vice versa. It is called the stop loss order in trading jargon.
Making the Right Choice
There are plenty of trade copier software packages available for use in the market. The choice of software is what makes the difference between success and failure. Hence, you should pay careful attention to the features the program has to offer.
The first most obvious feature and of course a standard feature on most packages is automation. Trading software opens and executes trades on the basis of pre-programmed algorithms. The Forex market is a highly volatile one. The real earnings come from responding quickly to the sudden movements in the market. And, if you’ve done a bit of reading on Forex trading, you must know that when these movements might occur is totally unpredictable. The copier software you choose should ask for minimum human intervention. A high level of automation allows one to copy trades to and from master accounts instantly.
The trade copier program must run the MetaTrader 4 trading platform. MetaTrader or MT4 as it is also referred to, is an electronic trading platform used in retail foreign exchange. It comprises a client and server component. The server component is managed by the broker while the client component is provided to his customers. If the program you have does not have MetaTrader 4, it is a better option not to invest in it. It is preferable to go for the older versions of the MT4 platform. Also, it should allow for regular updates as and when the newer versions are released. It should also be compatible with future versions.
When choosing trade copier software, the ease of use is another feature you might want to consider. Ease of use allows even the least tech-savvy traders to benefit from the program. The program should be easy to install. Detailed instructions provided by the manufacturer can be of great help in this regard. It makes it less stressful as it eases the learning curve.
Versatility is another feature that defines an efficient program. When we say versatility, we mean that the software has the capability to mirror trades to multiple accounts thus putting you in a better position to open and close trades. If you can get trade copier software that allows for reverse trading, there is nothing like it.
Additionally, one must be able to customize the copier program to one’s individual needs. This includes the ability to adjust profit and stop loss levels, multiplier levels, the choice of currency pairs and the likes. The software should be complete in itself and should not require any additional programs to support it.
Your budget also goes a long way in influencing your choice. Don’t hesitate to pay a little extra for tried, tested and proven software programs.
As we end, there is a small tip I would like to give. The trade copier system is an automated system and will take vital trading decisions on your behalf based on the market trends. However, if you want to be in better control of your investments, you should evaluate the collected data and decide to what degree you want to follow or copy the trade decisions of another investor. Also, don’t get into Forex trading a blank slate. You should go out and learn the best you can about Forex trading to give you a head start on the rest. There are very good resources out there to help you learn the market. This way you will compliment the software program and make it work better.
Forex trade copiers have changed the way investors can invest their money. Work with one starting today and turn currency trading into a potentially profitable investment option.