Nikolas Sargeant
If you are new or relatively new to the world of crypto, you might be very excited to jump in head first on an exchange where you can earn your share of the crypto billions being made around the world. However, before you do, it’s important to know a few key, sobering facts. The most startling is that up to 90% of crypto traders are losing money. This is a staggering amount of people and shows just how complex the market can be. Further, around 75% of traders quit the market after two years. So why then is there still so much hype around crypto trading?
Instead of dismissing crypto as a whole, a bit of context is important here. Surprisingly, these high percentages are similar for traditional stock markets as well, with most people losing money and a small percentage making enormous profits. What makes the crypto market so appealing to many is the accessibility. Instead of working through a broker, ordinary people can use mobile apps and trade for free (or tiny fees compared to using a broker). This democratizes trading, but also invites people who are perhaps less educated in trading principles, who don’t understand the trading platform itself, or who do understand the process but do not have a disciplined system that can protect them from impulse trades and the runaway losses started by temporary downturns.
So what is the takeaway here for those who are still excited about the thought of crypto trading? Certainly there should be a new respect for the trading process, and a healthy caution that trading is not as easy as some might believe. Crypto exchanges are not the new gold rush, but rather a sophisticated system of tokens that are constantly rising and falling, and only the most educated and disciplined traders can benefit. However, there is one exception to this, and it’s what makes crypto trading extremely powerful. Instead of starting your education from scratch, and working through losses as you learn the finer details of trading, you can actually take full advantage of the wisdom and experience these top 5-10% of traders have. Using a feature called “copy trading,” novice traders can select an expert trader based on their success rate, and tie their trading actions to the expert’s actions. Let’s dive into how copy trading works, the pros and cons, and what key platforms are offering both the experts and those who wish to copy them.
Copy Trading Basics
While different platforms offer their own variations of copy trading, the basic elements, incentives, and risks/opportunities are similar. There are also platforms, like Bitget, that focus on copy trading and offer a wide variety of copy trading elements depending on what novice traders wish to accomplish.
From the perspective of the novice trader, the setup is fairly simple. They can look through those traders who have demonstrated a high success rate and have agreed to allow copy trading. Based on what they see, they can lock in a certain value of crypto for a certain time period, and their assets will then mimic those of the expert in how they are traded, staked, or held. More advanced strategies could involve futures, derivatives, or even algorithmic bots. Usually the novice trader can bail at any time if they decide that copy trading is not for them. From the perspective of the expert, they are incentivized to allow copy trading because they earn a small fee from those who wish to benefit from their expertise. That allows them to keep earning from their own talent and experience, and gain an additional revenue stream from those who are potentially profiting from their status as an expert trader. The bottom line for novice traders is this: You can look at the performance of the experts, and for a small fee automatically emulate their trades in hopes of making a profit. You can see what other copy traders have earned from each expert, and help that metric to guide who you want to copy. There is no guarantee of profit by using copy trading, but as a novice the strategy often increases the probability of being successful in the market. Further, for those who dream of trading successfully on their own, copy trading can be the gateway to a more detailed education on trading, along with the more subtle strategies to earning profit long term.
Different Strategies
As mentioned above, different platforms offer different flavors of spot trading. Bitget is likely the most comprehensive, as it covers the gamut of potential goals novice traders will have as they pursue copy trading.
At one end, copy traders can emulate the experts of their choice by focusing either on futures copy trading, where the expert illustrates their own path for navigating the market while the copy trader sets their assets to follow; or spot trading, where users set up their assets to copy the individual swaps performed by the expert of their choice. Both strategies have a less educational focus and more of a service-oriented approach, where assets are tagged to an expert and follow the short or longer term moves they make. On this platform users can see the profit the expert has made for themselves (over different time periods), as well as the profit that copy traders have made by following the expert. These values aren’t always the same as different copy traders jump in at different times, and short copy trading periods during temporary downturns can result in a loss even when the expert is doing well over the long term.
At the other end, where novice traders want to learn how to become experts themselves, there are several other copy trading options. The first is that copy traders can subscribe to a strategist in order to develop a proven structure for trading in the marketplace. They can select from a variety of experts offering this help, and instead of individual trades they can learn how to put together the framework for how they should be making their decisions. This is primarily for novice traders who believe they may not yet have the education, but do have the strict discipline it takes to successfully navigate a trading strategy. Alternatively, traders can review algorithmic bot strategies and actually purchase one for themselves. This allows the strategy to be an automated set of actions and reactions that they own long term. Both strategy elements contain some risk depending on outside factors and how the market is doing, but they can set up key behaviors that are helpful in growing novice traders into experts.
Full Service Copy Trading and Final Thoughts
Finally, there is the “full service” approach, where novice experts who are deeply focused on their own education can pay higher fees to use experts as consultants, asking them questions as they learn to implement the strategies they’ve decided on. The fees and amount of support depend on the expert, but this can be a solid final step in learning those subtle but important elements of taking on the market and coming out ahead long term.
Whatever your goal, copy trading can be a valuable tool for novice traders who are looking for a smarter approach to crypto trading. There are still risks inherent with all types of trading, but copy trading has the potential to improve not only your chances of success, but your ability to gain valuable trading education quickly.
