When new Forex traders want to step into the market, they do not have to reinvent the wheel. Besides online courses or learning from professionals, they can also copycat successful traders. Copycat investing, or also known as coattail investing, simply means that a trader follows an experienced investor and makes the same moves. This doesn’t guarantee instant success, but it can be a great way to learn and understand certain investment strategies. Although the results can go either way, here are some tips to get you going as a copycat trader.
Playing with the Big Boys
One thing to remember when trying to follow the moves of someone like Warren Buffett is that he’s been doing this for a long time. Along with all the experience he has gained, as well as successes, he has also suffered multiple losses along the way. Before following someone who has enjoyed outstanding successes, you need to be prepared for the downturns as well. Be careful how much you risk when following someone else’s strategy unless you can also afford to absorb large losses.
Scouring the Traders
Finding an investor to copy is one of the biggest challenges in copycat trading. Scour the traders until you find a selection of those who have been most successful. Then study their strategy to see if it fits your investment style. If yes, then discreetly stalk, or quietly follow, that person’s trades. Don’t limit yourself to one investor. Watch a selection of the traders who are getting the best results. This could take days, weeks or even months, but patience is the key here. The more you learn before you begin your own trading the less risk you will be taking with your funds.
Copying a Trading Strategy
Once you have narrowed down your selection to the traders you want to follow, learn when they make their trades and why. Check out the circumstances that they use to initiate trades. In the beginning you might want to follow them so closely that you do exactly what they do. But at some point, you will want to understand why they are making specific trades. Do they base their entry decisions on market trends? Did you notice some newsworthy event that triggered a trade? This is where you will learn to trade independently. Over the long run, you can track their trades according to events, trends or a set rule of strategies.
Creating Your Own Trading Rules
The beauty of following and copying other traders is that while you are making the same trades that they are making, you will hopefully enjoy the same successes. This is a real boost for your confidence as a forex trader. Rather than losing in your first few trades, there is a better chance that you will come out even or turn a profit. As time goes on you can understand the logic behind each trading strategy and build your own set of rules that reflects your personality, character and trading style