The moment you enter the Forex online trading world, you are immediately bombarded with many decisions to make, especially when it comes to choosing an approach. Two of the most widespread options are copy and manual trading. Though both come with their own set of perks and disadvantages, which one is better for you?
Copy Trading
With the copy trade approach, you can mirror the trades of professionals. It has a definite list of benefits and drawbacks. These include the following:
Advantages
- Less effort: If you are new to forex, then copy trade is reasonably hands-off. You’ll be finding access to expert traders; hence, your learning and profits may increase.
- Diversification: You are allowed to copy a number of traders at the same time, thus diversifying your risk by spreading it between several strategies.
Disadvantages
With all its conveniences, copy trading has some disadvantages. You are totally dependent on the strategy of another person. If their trades are not going well, you will also start facing losses. Furthermore, though the copying of a successful trader can be profitable, their strategies mightn’t be appropriate for your risk tolerance or financial goals. The other risk here is complacency, whereby you may stop learning the most basic skills yourself.
Manual Trading
Manual trading is based on your view of the market. Many traders spend several hours studying charts, identifying market trends, and building custom strategies. This approach requires both knowledge and time; hence, it is more suitable for individuals who prefer to be more hands-on in investment matters.
Advantages
- Full control: You decide on everything, so you can modify your strategy at any moment due to market conditions and personal preferences.
- More flexibility: You are free to adjust your trade according to your risk tolerance, financial goals, and your style.
- Learning process: Manual trading develops your experience and skills, which will help you become less dependent on somebody else’s analytics as a trader.
Disadvantages
It is very time consuming and requires the trader to stay in front of their monitor and look at the market all the time. It is also emotionally costly, as there are extreme changes in the market. You also have to invest in education, tools, and analysis if you wish to achieve results that might be a bit more than what you would want to do.
Both copy trading and manual trading offer unique advantages and challenges. The best approach depends on your time, experience, and preferred level of control in forex trading.