Copy-trading is a type of automated trading that enables investors to copy positions opened and managed by other traders. Investors choose profitable traders and earn profit by copy-trades. Traders, in turn, receive a success fee or a percent of investor numbers who copy them.
To date, dozens of services provide copy-trading functions for crypto investors. Variety in this sphere slightly frightens beginners because there are too many functions, and their usefulness is not always understandable. In this article, we will look at the pitfalls and give useful tips to help novice investors choose copy-trading platforms.
Table of contents
- Tips #1: Choose platforms with API connected
- Tips #2: Pay attention to the availability of statistics on traders
- Tips #3: Test the service before you pay for the subscription
- Tips #4: Find the founders and teammates
- Tips #5: Strong Community is a green flag
- Tips #6: Check internet reviews about platform
- Tips #7: Follow up on marketing campaigns and influencers
Tips #1: Choose platforms with API connected
Phrase: «Not your keys, not your coins» is more real than ever. Creating security is a matter of first importance. But agree, you will prefer to transfer funds to a verified exchange account instead of an unknown service. For investors to gain control over their capital, a connection via API-key was creating. This mechanism allows us to connect a personal exchange account and manage funds without transferring them to third-party services.
Tips #2: Pay attention to the availability of statistics on traders
When a trader earns profit, it is good, but it is more important to understand how he does it. It will be a plus if the platform shows data on the initial balance, the average yield, as well as the drawdown as a percentage. There is a big difference between a trader who aggressively earned +300% of the deposit in 3 months and a trader whose account has been in existence for 5 years and gives a stable result.
Tips #3: Test the service before you pay for the subscription
It’s great when the platform has free access. It doesn’t always happen this way. Copy-trading platforms offer their services by the subscription model. There are special test periods to check the functionality, where you can use its performance and evaluate its features. The testing period is from 3 to 14 days. If this feature doesn’t provide, try to send an email to the contact address, asking to enable the testing period.
Tips #4: Find the founders and teammates
There is a team behind any service in trading space. Try to find more information about project creators. Find out what background they have and why they created this service. Often, the information about project creators can be in social networks, like Linkedin or AngelList. With this information, you will be able to understand the developers’ motivation and the prospects of the project.
Tips #5: Strong Community is a green flag
Most copy-trading platforms are new startups that have not yet had time to find a full user base. Sometimes there are exceptions. For example, a community in a telegram or discount messenger, which has 300 users, is already considered to be formed. More than 5000 community members indicate that the service has a broad user base. A strong community gives a vast advantage for beginners because there you can get to know traders and learn more about trading. On the other hand, the community help with platform development by pointing out functional errors on time.
Tips #6: Check internet reviews about platform
Feedback from users who use the platform you are interested in will be most valuable. You shouldn’t wholly trust in an unknown Joe from the Internet. It is necessary to analyze those reviews that reveal the service’s performance and give some value. Sites such as Trustpilot or Bitcointalk are great for finding the reviews.
Tips #7: Follow up on marketing campaigns and influencers
Marketing helps to raise awareness, so you can eventually also learn about the project. But intrusive advertising and an aggressive approach is not the best way to reach an audience. If a project starts actively selling its services to you, ask yourself whether the project needs users or needs to sell the service despite its quality. The same situation is with the influencers. The people you love will not always promote the products that are suitable for you.
Based on the tips above, a young investor will be able to find a suitable service and build his copy-trading strategy. For example, True PNL may be a worthy platform.
True PNL is a public copy-trading platform that allows connecting investors and traders via API. The platform has free access and fully meets all the requirements for finding profitable traders.
By the way, you can prepare for the search for a trader right now by registering on the True PNL platform and getting premium access. Sign up and find out here.