During the Forex period, social trading became a very popular kind of passive investment. While it is still frequently used across platforms that provide access to derivatives such as futures and CFD contracts, it has become even more common in the crypto business. One of the reasons it is so popular is because the cryptocurrency market necessitates significant study for each digital asset with which you intend to operate. Many active investors just do not have the time to adequately educate themselves on them.
With the crypto market reaching an impressive $2.4 trillion evaluation at the beginning of 2022, copy trading became even more popular since many newcomers decided to try investing in this industry without fully understanding how crypto projects are evaluated by traders.
However, experienced professionals found ways to navigate the intricacies of the market and turned in a profit. Currently, we are experiencing a strong bearish trend and market crash that mirrors everything that happens in the global fiat economy. Nevertheless, this is a great time for traders who know their way around shorting assets. You can follow some of the most successful investors and sow the rewards of their labor!
Contemporary copy trading platforms
Many services that appeared from seemingly nowhere are often branches of established automation vendors with roots in the Forex market or tech startups that focus on creating interesting financial products for the growing crypto industry. Both have their merits. While experienced companies offer more polished and easy-to-use solutions that cater to wider audiences, many newcomers to the industry have complex products that will be appreciated by people with some technical know-how.
Copy trading can be very simple. Let’s take WunderTrading, an established brand in the industry, to explain how social trading is done by companies that cater to the general public. There are five distinct steps:
- Create a new account at WunderTrading and sign up for any plan that you find appropriate.
- Connect your exchange account (you can connect to Binance, Coinbase, FTX, and several more exchanges).
- Go to the market tab and find traders that perform to your liking.
- Click “Follow” to determine which traders your bots will copy.
- Launch bots, and they will track the market activities of followed traders and repeat their actions.
While many other automation strategies focus on implementing a pattern based on technical analysis, copy trading services allow you to quickly find someone with a proven track record and simply follow their methods without fully understanding them. Since many experienced professionals employ complex analytical approaches, novices may be overwhelmed even if they attempt to reverse-engineer some of the strategies these traders employ.
How to choose good copy trading software
The vast majority of useful solutions are specialized platforms that offer versatile automation products like DCA, GRID, and Arbitrage bots, as well as analytical tools. It is quite hard to identify companies that deserve your attention and can be used to build efficient trading strategies. However, it is much easier to find a reliable vendor for copy trading in crypto.
Fundamental aspects of the service have been sorted out long ago. The vast majority of popular exchanges have APIs and offer various integration solutions to external providers. You can find really good companies that provide excellent products.
Some aspects that you should consider when choosing your vendor:
- Convenience. User experience is often cited as the most important aspect of any online service. You should be able to easily navigate, explore, and use all important features of the service. Use platforms that do not overwhelm you with unnecessary information, overly complicated graphs, and too many seemingly redundant actions.
- Pricing. Every product comes at a certain price. While you should never put on your Scrooge mask, overpaying for lacking services is definitely something you must avoid. Since selecting a truly reliable trader to follow may take some time, paying for a copy trading bot that does not bring in profits is a sure way to financial demise. It is a good idea to select platforms with free plans or, at least, trial periods.
- Versatility. Social trading is not the only way to automate your investments. DCA buying is a good way to build up a solid stack of assets over time. GRID bots can be profitable when used correctly in markets with moderate volatility. Using only copy trading apps for crypto is often not enough to guarantee noticeable results.
Our TOP 3 platforms for copy trading in 2022
We tested several platforms and chose three that look promising and can be used by beginners.
- WunderTrading is an excellent choice for novices. We already discussed their copy trading guide. It is that simple: create an account, choose a trader to follow, and launch your bot. In addition to social trading, you will be able to use DCA, GRID, and Arbitrage bots, as well as advanced analytical tools to better understand Bitcoin and Ethereum.
- 3Commas is a very similar service that also has a rich selection of interesting instruments that can significantly improve your investment results. The interface seems a little bit stiffer and harder to navigate compared to WunderTrading. It is cheaper but does not have the same range of premium features.
- Cryptohopper is another platform that has a dedicated social trading branch. You can follow traders and download preset bots that can be utilized independently. It can be a very interesting learning experience to vivisect strategies employed by successful professionals, but you should never run a bot that works using signals that you do not understand.
Should you use copy trading?
While learning about financial markets on your own is a good idea for those who plan to become professional traders, it is not the most efficient way of investing for people who are interested in putting their money to work without participating in the profit-making process. If you want to be an investor earning passive income, using copy trading is a good way to mitigate risks while performing similarly to competent professionals.