Everyone wishes they had that one friend who’s an expert at trading. You’d ask him to trade with your money, offer him a cut, and walk away with profits without putting any effort into it. We might not have that kind of friend, but luckily enough, there are copy trading platforms that help us find such people.
Copy trading involves copying professional traders for free and mimicking their trades in order to successfully trade the markets. In this article, I’ll show you how to get started with copy trading by using Shrimpy.
What Is Copy Trading and How Does It Work?
Copy trading is a process in which you mimic another person’s trading activity. Whenever he buys, so do you. And whenever he sells, you do as well. The trades are executed automatically, all you have to do is select the right trader.
Copy trading can involve both short-term and long-term trades. You copy the other person’s trades no matter at which frequency he does so. For example, if the trader I copy executes 10 trades in five minutes, my trading account will open the same trades. Likewise, I can hold onto a position for months if the other trader decides to do so.
The main thesis behind copy trading is that you find someone who is profitable. The best person to copy trade would be someone who has more wins than losses. After all, you'll have to suffer a few losses even when copy trading. All that matters is that you have made more money than you lost by the end of the month.
Choosing a Copy Trading Platform
To get started with copy trading, you first need to find a suitable trading platform. What makes a copy trading platform good? Here are a few key traits:
Active trading community
Security & stability
Let’s inspect each key trait one by one.
An active trading community is the most important aspect of a copy trading platform. Without traders to copy, how do you plan to make any money? You need a platform with active traders and a large user pool to pick your copy trader from. Remember, the more people use a platform the more choices you’ll have, and thus, a better chance to find a profitable trader.
Security is another important point because you don’t want to risk having your assets stolen or mismanaged. A copy trading platform needs to perfectly mimic another person’s portfolio, and there’s no room for error there.
The platform must also be regulated. This decreases the chances of having the team run away with your funds or mismanage the platform. I also suggest searching for feedback and reviews in order to determine how the community feels about your platform of choice.
Last but not least, there is trading transparency. What I mean by that is that the platform shows you a completely transparent overview of the other person’s trading activity. You should be able to see his:
Number and type of assets invested in
Currently open trades
The more information you can see, the better. I’d advise you to also check whether you can see the fees charged by the user for copy trading him.
Copy Trading: Trader Selection Process
Now that you know what kind of copy trading platform you should look for, it’s time to figure out how to select the right trader.
This part can be difficult, because as someone who’s not profitable, you might not know what makes a person a good trader.
You might copy someone who’s currently on a winning streak, only to realize that luck is on their side for a brief moment. You take a better look at their profile and find out that they have lost most of their trades over the past month. They have only been profitable this week.
I recommend looking for consistency when searching for a trader to copy. The person should have a good track record for a long period. The ideal candidate should have the following attributes
A diversified portfolio
A win rate higher than 50% for longer than a month
A history of trading publicly
A strategy that does not exclusively involve risky plays
Copy Trading with Shrimpy
Shrimpy is an automated portfolio management platform that helps automate your portfolio with crypto trading bots. Besides offering investment strategies such as portfolio rebalancing, Shrimpy also enables you to copy trade with other users.
You can find the copy trading feature by clicking the social tab after you register and sign in. This tab shows you a list of leaders, people who offer you to copy their portfolio, who you can inspect. You can discover various users and sort them according to their follower count, performance, and portfolio.
Once you click on a portfolio, you can see the user’s performance and other important information. Here is a snippet of a user’s portfolio performance over the course of a month. You can also verify and check his daily and weekly performance as well.
Every trader has a transparent trading history. You can see which assets he bought or sold and how much. You can also see the timestamp for the trade and see how much the allocation changed after the trade.
You can also see the user’s latest portfolio and view their allocation. For example, this user has converted all his assets into ENS.
The leaderboard area is a place where you can find and analyze leaders. You should look for consistently profitable leaders who trade on the same exchange as you do. After finding the right leader, all you have to do is follow and copy their portfolio.
When copying the portfolio, you can decide how much capital to allocate and whether you want to enable a stop loss. The stop loss functions by stopping your portfolio from copying any more trades once the portfolio’s value becomes lower than a certain figure.
For example, if you have a portfolio worth $10,000 and the highest loss you’re willing to suffer is 10%, you can set the portfolio stop loss at $9,000. All you have to do after adding the stop loss is press start.
I still advise you to keep track of your portfolio for the entire duration of this process. Although copy trading is a passive trading strategy, you should still monitor your portfolio’s performance and check how the leader you’re copying is doing.
If you want to learn more about copy trading, I suggest reading the following articles:
Marko is a crypto enthusiast who has been involved in the blockchain industry since 2018. When not charting, tweeting on CT, or researching Solana NFTs, he likes to read about psychology, InfoSec, and geopolitics.
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