Can I copy trade the crypto markets?

[Sam Button]

[Justin Freeman]

Crypto and Copy trading are actually quite commonly associated with each other; maybe because they’re both relatively new concepts that have grown in popularity over the last ten years or so. A quick search of one of the social / copy trading sites such as eToro will offer information on traders that have a track record of making money in crypto and are willing to share/sell their trading signals. Using one of the more established platforms should then allow you to access a range of information that will help you make a decision on if, or who, to follow. Copy trading involves one (copied) trader having their trading decisions automatically followed by a copying trader. This ‘automation’ is what distinguishes copy trading from social trading, the latter being a process where trading ideas are shared and exchanged informally. A lot of Copy Trading accounts also have low minimum capital balance requirements. FXTM Invest for example has a $100 (or equivalent) limit on copying and if you’re looking to be copied then you only require $200 in your account. Not only does this lower the barriers to entry but it also encourages traders to start allocating in a small size which is a particularly useful approach to take, especially when starting out. There are some risks associated with both the asset class and trading format. With the passage of time, cryptocurrencies, and the trading of them, become increasingly part of the accepted norm. They are relatively new instruments though and trading these markets needs to be entered into with eyes wide open. Let’s face it, the news flow associated with them is part of the reason that there is enough volatility for traders to make a profit. Copy trading is also something of a ‘disruptive’ business model. It’s shaken up the financial markets (which is probably a good thing) but there are features associated with it that traders need to consider. Does the trader you are considering copying: have their own funds invested in their portfolio? How much? How much information are they really sharing? How much of the advertised track record P&L performance includes unrealized P&L which, as in the below diagram are possibly old stagnant positions the trader can’t get out of. The platforms, such as ZuluTrade, that allow you to do more research and answer more of these questions are the ones to start your journey with. If you’re looking to access the crypto markets but without doing a lot of the legwork yourself, then copy trading could be for you.