One of the most attractive things about forex trading is the sense of independence and financial freedom it offers. This is what attracts people to the market, despite the challenges of trading financial markets.
To beat the market constantly is a difficult job. Conditions change constantly, economic data must be interpreted, and charts must be read accurately.
But it is not impossible, as some traders are doing it quite successfully.
Naturally, forex brokers stepped in and raised the bar by offering an incentive to trade to both successful traders and wannabes. This is how copytrading appeared – a system of following and copying trades of successful traders with your own risk adjusted to your trading account.
Effectively, by using such a service, anyone can work alongside some of the top forex brokers in South Africa. Here’s the process explained.
First, the broker sets up the copytrading service by incentivizing successful traders to join the programme. It means that the traders will usually be rewarded with a percentage of the profits made by other traders who follow their strategy.
But there are different ways to reward successful traders, and brokers ended up being quite innovative. All in all, successful traders are tempted to join such a programme because they have an alternative source of income on top of beating the market.
Second, the brokerage house advertises the service to new and old customers who struggle with trading. One should remember that a true brokerage house has no interest in its customers losing money.
Just the opposite.
A true brokerage house should be a partner to any trader—the successful one and the struggling one too. The broker earns a commission or a fee simply by routing the trades to the market. The bigger the number of trades, the better.
So, the broker is interested in having as many active traders as possible. Therefore, a copytrading service is tempting because one may succeed in the market by following other traders’ activities.
The beauty of such a service is that it adapts to the size of any trading account. Also, the risk may be adjusted.
In other words, the trading account size does not matter, as the copytrading service automatically reduces or increases the size of a trade based on the funds available and the risk parameters set.
Also, using a copytrading service works well for diversifying risk. For instance, one may follow different traders and, thus, combine different strategies to diversify risk.
Finally, copytrading offers an incentive to learn more about markets. Every trader has an idea about where the market should go next, but opinions may change after looking at what successful traders do.
Naturally, competition among copytrading brokers increased in the sense that they strived to attract the best forex traders in the market. But as always, competition is good as it leads to improved services and better trading conditions for the customer.