Top 5 Downsides of Copytrading

Let’s take a second to imagine the life of a trader: staying up in the wee hours of the night, struggling to keep their eyes open while cracking their heads to figure out those mind-boggling charts. Well, you might very well just be able to skip all that with copy trading but nothing is really perfect, right? So before you jump right in thinking copy trading could be the next Hogwarts express train to a magical windfall, let’s take a look at the three main downsides.

In a nutshell, copy trading literally means copying the trades of others. So when the Chosen One (whichever signal provider you might fancy) buys a particular currency pair, your account does the exact same thing. Easy-peasy lemon squeezy! So now you might wonder, are there any pitfalls hiding behind this mysterious copying sorcery? Well, let me shed some light on this before you swoop right in!

1.  Are your signal providers even legit?! 

First up, the choice of the trader you are following is absolutely crucial. Many novice traders out there have fallen into the hands of black hat traders, many of whom are not even trained by profession. Copying these traders is as good as throwing your hard-earned money down the drain! There are tons of unverified traders out there sharing their signals on various platforms using false credentials. So mark my words, be extra careful.

2.  Fees, fees and more fees

Secondly, there are many, many ways brokers can charge you when you get started on their platforms. The more common ones are entry, exit and performance fees as well as profit sharing and commissions. That’s quite a mouthful even before you start talking about actual earnings. So let’s begin!

Entry and Exit fees:

Entry fees can be charged after an account is opened for trading, be it a fixed rate or a percentage fee, and the exact same goes when you exit the investment. The outrageous truth is that many times exit fees are not even explicitly stated in the contract! 

Performance fees:

These fees are extra charges imposed if the investment generates positive returns, and sometimes they can come in the form of profit sharing as well. 

Commission fees:

Commission fees are additional charges applied by the broker based on the number of lots traded. 

So, all in all you may end up paying for a whole lot more before you even start generating profits for yourself!

3. Dealing with robots? 

While, we may think that our signal providers are actual live traders slogging out there for us, on some occasions, you might chance upon bot signal providers. The major problem with these fully automated “robot” traders is that if the parameters and optimization codes are outdated, the system will end up generating positions that are not in line with the current market. That is a big fat NO coming your way. A novice trader might even have better luck with trading than a random bot so why take such a risk!

Here’s my two cents’ worth: the selection of brokers is extremely important when you want to engage in copy trading. Many of the above risks can be mediated with the right broker, be it the selection of signal providers provided, or the fees involved in the process. Well if this does pique your interest, Omada is your one-stop solution to give copy trading a shot! Sign up for an account now!