As in all aspects of life where there are opportunities of profit there are also some underwater stones that you must avoid. This applies also to the art of copy trading. In this article I will teach you some useful unwritten rules and tips on how to make the most out of copying other traders.
Statistics can be tricky
Do not blindly rely on the main statistical indicators. Some traders are manipulated with different tools in order to increase their ranking. They do it to get more followers, copiers which in turn gives more influence and also potential future income as decisions for the accumulated copiers is in the works for copy trader system. By learning how to spot the artificial rankings you will be able to create a stable and profitable portfolio of traders.
Talk to the traders you want to follow
In order to verify the trustworthiness and potential of a trader you must carefully read their discussions and also ask your own questions. A good sign for a trader is that he keeps active discussions with his followers explaining his strategies and actions.
Watch out for the extended SL's (Stop Loss orders)
One way how to increase and sustain high gain and profit ranking is by opening trades with extended Stop Loss orders, meaning that in case if the trade turns bad it does not get closed because not damaging the ranking. But moneywise this is a loss that might just get bigger and bigger in the end. So carefully analyze the trader's stop loss tactics.
Too many trades might not be a good signal
Generally I advise to avoid copying merchants who have more than 5 trades open with extended SL's as even three unlucky open positions can quickly eat your allocated account budget.
Search for steady gains
Observe the profit and loss line – the smaller the gaps, the better. The gains should be steady – it means that the trader sees the big picture and uses both fundamental and technical analysis. You do not want to follow traders that just got lucky in isolated trades. You want a trader that works in the long-term.
Look beyond the top ranked traders
Be smarter than the average copiers – dig deeper and diversify your trader portfolio with guru traders that are not on the first page of rankings as there are many great traders around the corner.
Analyze Profit days.
Profit days criteria in the ranking system allow you to see how consistent the trader is in his correct decisions. This tool is best used in 6 and 12 month period and it lets you separate the long-term guru's from those who just got lucky.
In the end I want to encourage you to try the copy trader as it really holds great potential in the future of forex copy trading and the faster you learn it the bigger opportunities for you to succeed.