The crypto market is extremely complicated, thus traders rarely exhibit consistency. Although many other financial markets may be properly examined with a basic understanding of fundamental and technical analysis together with intuition, cryptocurrency markets are less closely linked to the global economy and call for a different strategy.
Since consistent performers are rare in this industry, many retail traders choose copy trading crypto strategies.
What is a copy trading strategy?
Automation services provide all sorts of different products including DCA buying, GRID bots, Arbitrage trading, and more. However, some of the most popular services from these vendors are products with social elements. A copy trading service is a special product that allows you to automatically repeat orders placed by well-performing investors selected by automation vendors.
To make things a little bit easier to understand, we will take WunderTrading as an example. This automation provider has a plethora of different products including the one we need to explain now. How does the WunderTrading copy trading platform work?
The process of setting up a bot that will repeat the actions of other traders is quite simple:
- Go to the official website of WunderTrading and create an account.
- Connect your exchange via API (select from 11 different options).
- Go to the marketplace and choose traders that meet your requirements.
- Click “follow” next to their names and launch the bot.
There are several important nuances that you must consider. While many investors allow followers to copy their orders for free, some managers have flat fees that you must pay upfront. It is an inherent risk that you have to accept. Some people charge up to $400 for their services.
While such prices may seem a little bit high, you should consider the fact that many trust managers usually have percentage-based commissions which can be quite hefty when you have a large capital. For example, a 2% cut from a $100000 portfolio is $2000 which is 5 times more than the biggest flat fee on WunderTrading’s marketplace. At the same time, many traders have all-time ROI reaching 400% and recent gains of over 1000%.
Why should you use this strategy?
Using copy trading signals in your overall investment strategy is a good idea because you can always find a top performer and start following their lead. For many people, it is the only way to consistently make money in the crypto industry.
There are several reasons why most retail traders do not earn money reliably:
- The crypto industry has thousands of projects that are interconnected and may affect each other in many ways. For example, the Ethereum merger with the Beacon network was relevant even for all layer-2 platforms deployed on the Ethereum network. Cryptocurrencies that are issued by L2 platforms can affect the performance of ETH. Understanding these intricate connections between different projects is a challenge even for knowledgeable enthusiasts.
- Technical analysis is a skill that you have to obtain and hone. Even the best analysts regularly update their strategies, rethink the functionality of some indicators, and try to learn from other respectable specialists in the industry. With the emergence of specialized analytical tools for the crypto industry, we have even more instruments to master. For many retail traders, studying so much is simply impossible.
- The crypto market rewards risks. Many conservative investors often do not risk often enough and fail to capitalize on massive price swings. They set take profits too low and never tolerate any losses. Many experienced crypto traders do not fear and jump on opportunities to earn a ton of money at once. Bitcoin copy trading can be extremely profitable if you find someone who can consistently outperform the market!
These reasons justify the huge demand for trust management in this industry. It is simply too complex and intricate for many retail traders to understand and analyze efficiently. Instead, you should try to copy trade with signals from some of the most reliable performers who know the industry inside and out.
Choose the best copy trading app
The industry is full of interesting products that will most certainly catch your attention, but you should focus on social trading. Several platforms provide an excellent level of service, but we will recommend using WunderTrading.
Here are some reasons to pick this vendor over many of its competitors:
- Versatile products in the catalog. The provider offers DCA, GRID, and Arbitrage bots on top of a wide range of custom scripts and copy trading options. You will find over 200 top performers working on Binance alone! It is a good destination for any retail trader interested in automation.
- Flexible pricing. You can start by registering and using the free plan that allows users to run up to 5 different bots. Switching to a paid plan is not necessary if you don’t want to expand your trading operations at all.
- User-friendly interface. The dashboard is intuitive. You will find everything you need in the dashboard. Manage your portfolio, read analytical reports, and write elaborate scripts without switching between browser tabs.
- Multiple integrations. WunderTrading can use signals from TradingView and act on your behalf on 11 different crypto exchanges including Binance, ByBit, CoinBase, FTX, and many others. It is a versatile platform that can work with industry-leading CEX and analytical websites.
The main takeaway
Copy trading is a great way for beginners to start trading without having any knowledge of technical analysis and the landscape of the crypto industry. If you want to be successful in this dynamically evolving domain, you should take a closer look at automation providers that offer social trading products.