Forex trading is very different to what it was, say, 10 years ago. Now traders have the option of automatically copying trades of other investors through a social trading network. This is particularly beneficial for those who have just entered into this line of trade with hopes to win money. By registering with a notable broker, a new can link their profile with a veteran and copy their trading strategies religiously. The only condition which applies here is sharing profits. So in many ways, it could also be known as profit sharing Forex trading.
Explaining further about Copy Trading and Investment Percentage:
There are some who believe that the manner in which one does copy trading is highly dependent on the trading platform they use. Despite this, the basics of copy trading remain pretty much the same.
You invest a certain portion of your investment upon a particular trader and religiously follow all their trading moves and strategies in a percentage manner. For the sake of diversification, notable brokerage firms don’t allow more than 20% of your investment in the hands of a particular trader. The reason for that also seems logical enough.
Some traders owing to their experience have the rub of the green going their way. They crack 6 out of 10 trades consistently. If you follow their strategies and graphical analysis, then you can also be on the profitable side of trading too.
However, everyone knows clearly that such things in Forex are sporadic. If a trader has a 50% success ratio, then that’s an impressive record. On the contrary, if things are not working out for the trader you are copying, then it means that the losses will also magnify. This is why brokerage firms keep the investment percentage to a fixed percentage.
Where does Profit Sharing come About?
In copy trading, you are trading based on the portfolio of another trader. You are not doing the research yourself, rather you are just seeing what risk management techniques they are exhibiting and what variables they are looking at in their trading charts.
As you are not doing any of the work! It is the trader you copy that is doing bulk of the work. For their efforts a particular portion of your profits will be shared with them. Though the range of profit sharing Forex trading differs, it is somewhere around 15-50%.
Is this a Suggestive Way to Trade?
Nothing compares to the rudimentary way of trading currencies where traders frames their strategies as per market analysis and knowledge. However, for those new to trading, sharing profit Forex trading does seem to be another alternative to demo trading.
By watching closely at what the experienced trader is conducting their market analysis, you can keep note of their methods. Once you do gather a fair amount of knowledge about the market, you can bring about your personal experimentations. Simply speaking you can formulate your individual trading approach.
The bottom line is always learning about how FX market works and this does seem to be one of the many ways to learn about trading mechanisms. So, if you are thinking of indulging in profit sharing Forex trading, do try it out.
The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.