Here's How You Can Grow Your Stock Portfolio By Just Copying Someone Else
Despite what school might have taught you, copying someone else can be much better.
When you were in school, it's likely you were discouraged or even punished for copying the person next to you.
But when it comes to investing your money in the adult world, it can be straightforward to copy experienced investors with defined investment strategies.
Copy trading essentially lets an eToro investor assign some of their capital to proportionally mimic the portfolio of other investors on the platform.
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The first bit of terminology you need to know is 'copier' means you or the person who wants to get started in trading, and 'Popular Investor' is the person you're following. Popular Investors (PIs) are experienced eToro investors with unique investment strategies, and join a programme overseen by eToro's Investment Office.
When you get into copy trading on Etoro, there are a few rules.
The minimum amount to invest as a copier is $200, but the minimum amount for a copied trade is $1. If the Popular Investor opens a trade with 1 percent of their available capital, then you as the copier will open the same position with 1 percent of your available capital, unless 1 percent for you is less than $1. In this case, you wouldn't replicate the trade of the PI you are copying.
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Once you get those limitations set in your head, then you can start investing.
When you open a copy position, you'll be given two options: copy all trades or copy open trades.
You can copy all trades under the CopyTrader system, which means you'll be able to invest in all of the currently open trades of the Popular Investor. Under this method, you will be getting the rates at the time you copy, rather than when the trader originally invested.
You'll get the same stop loss (SL) and take profit (TP) as the original trade and you can close a specific copied trade without closing the copy account.
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The second way to copy trade is copying only new trades. This will mean you only replicate new trades that the copied trader opens after the copy action starts.
New trades will open at the same rate as the copied trader opens them, and the trades will have the same SL and TP as the original trades.
You can take advantage of the Copy Stop-Loss (CSL) feature that allows you to cash out automatically when your investment sinks below a certain point.
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The market could take a massive tumble while you're in a meeting or watching TV and the CSL system will ensure your total copied investment doesn't fall below a certain point.
eToro states: "The system will automatically set the CSL at 40 per cent, as a default, of your total invested copy value per copy relationship.
"If a copy relationship has unrealised losses of 40 per cent of the allocated funds, the CSL will trigger, and all the positions in that relationship will close."
You can set that CSL between 5 and 95 per cent, depending on your risk profile and individual investment goals.
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eToro also has a Paused Copy system that allows you to temporarily stop copying a trader without actually closing all the currently opened positions.
Before you get stuck in, please make sure you understand the risks of putting your faith in the trader.
All investing carries risk. eToro says wannabe copiers should consider and define their risk appetite and make their investment decisions carefully.
Even with copy, the basics remain the same: understand what you are investing in, diversify and don't invest more than you can afford to lose.
Featured Image Credit: PAStewart Perrie