Top 5 tips to reduce risks in copy trading
2 min readFeb 19, 2024
- Do your research. Check if the trader you would like to follow is actually worth following. If he changes his trading strategy constantly, or has had several significant losses recently, you’d better look for another trader to copy.
- Make sure you understand the trader’s risk level and you are fine with it. Some traders place risky orders in the hope of earning more (in the case of losses, they also lose a lot). If you are fine with it, you can follow such a trader. But if you prefer moving slowly but securely, pick a trader with a low-risk strategy.
- Diversify. If you have some funds to copy several traders, do so. Pick traders who work with different crypto pairs and use different strategies. If one loses, another will earn. Taking this approach is the best way to avoid excessive losses.
- Be patient. Some people switch from one trader to another rapidly, without waiting for results. They don’t give traders any time to close a profitable deal and thus, are losing money.
- Always set limits. Normally, a copy trading service doesn’t request you to assign all your funds to copy trading. You can allocate to copy trading purposes a specific sum. If you lose it, still, you don’t lose all the funds in your account. Some platforms allow you to set a limit on losses. If a trader loses money, and this limit is reached, the orders of the trader won’t be copied anymore. Finally, you can even set upper and lower limits for an order. Orders will be copied only if they fit within the range.
