If you are thinking about using a copy trader in your Forex strategy, I have good news for you. Trading on the Foreign Exchange Market can be very profitable and fun as well. The best part is that it can be done by almost anyone.
That is right, anyone who has some capital or a decent understanding of the stock markets. You do not even have to be an experienced trader to make money using this method; it only takes common sense. A forex trader essentially borrows money from investors at a discount and then charges them a fee for the actual interest paid on that loan.
Of course, there are tons of ways that this can be abused. One of them is to use the interest to make up for a previous investment that went bad, or just to pocket profits. This is what most forex traders are after. So, how do you know if this is the kind of strategy you should be using?
Well, here are some ways of telling whether or not a trader is using a good forex strategy. First, is he or she provide a daily entry signal? If they are, then they are probably doing something right. Of course, most of us don’t do this.
We want to invest in the most reliable way possible, but the constant fluctuations of the currency markets mean that we need a system that can be tested over time to see if it is working. Most good traders will provide this service for you.
Second, does the trader use several major currencies instead of just one? Usually, more traders will trade a few pairs of major currencies and a couple of popular ones. This increases liquidity, which means that you can find a lot more trades happening at any given moment.
The trader who offers the most liquidity and most reliable signals will have plenty of buyers and sellers interested in his or her trades. This results in higher volatility, which means that you will get more of what you paid for. Third, is he or she using a forex trading strategy that involves stopping losses and take profits?
A good strategy will allow you to set stop losses so that you are able to get out of a trade quickly if the market takes an unexpected turn. A forex trader, who isn’t setting stop losses appropriately will quickly lose money.
Fourth, is the trader using a combination of several trading strategies? Some forex traders will combine a few of their favorite strategies to lower their risk level and increase their profit potential. Others will stick to using only one or two proven techniques.
Regardless, of how you decide to trade, using more than one method at a time minimizes your risk. Fifth, is the forex trader offering a free newsletter? A quality newsletter can go a long way toward increasing your revenue as a forex trader.
While newsletters don’t make money on their own, they are extremely valuable to traders who have a serious interest in learning more about the markets. If the publisher is confident enough that his or her newsletter is worth the money to send, then they stand to make money by selling it at a deep discount to new customers.
Sixth, does he or she offers a demo account? If you find yourself comfortable with the way a particular trader’s software works, and you’re reasonably certain that it’s going to work in a trading environment similar to your own, then purchasing their software may be unnecessary. Trading Gator’s article does a detailed review on eToro copy trader. This will surely spark your interest.
However, if you’re still building your way into the forex markets and aren’t making much money on your own, then using a demo account can help you make a little bit more money. Just be sure that the account isn’t paying too much in fees to use the software.