Within the MEXC futures trading platform, besides the option to trade USDT-M and Coin-M perpetual futures, you can also participate in copy trading. Copy trading is a trading method that originated in the mid to late 20th century and has maintained its popularity ever since. In the cryptocurrency market, copy trading garners considerable appeal for both newcomers and seasoned traders alike. In this guide, we will explain the principles of copy trading, along with its associated advantages and risks.
Copy trading emulates the trades of other traders, replicating their every action. In traditional financial fields, such as contract trading platforms, copy trading can be executed entirely manually, requiring you to manually make the same trades as the selected trader. However, in the cryptocurrency market, especially with advanced copy trading service providers such as the MEXC copy trading platform, the process is fully automated. In this scenario, you are only required to select the trader(s) you wish to follow and allocate a specific percentage of your account funds to them. Subsequently, copy trading is completely passive.
Copy trading offers substantial advantages to both traders and followers. By engaging in copy trading, followers can free up time for other investment pursuits and gain insights from seasoned traders, while traders gain the ability to manage larger capital, thereby enhancing their performance. For MEXCers, there are several specific advantages to consider:
Copy trading lowers technical barriers for novice traders, making it accessible even to MEXCers who are new to perpetual futures trading and lack prior knowledge of concepts, such as the order process and trading techniques. Therefore, it is exceptionally well-suited for beginners in trading.
Copy trading provides an opportunity to learn from seasoned traders through observation. The trading records of these professional traders serve as a knowledge base for enhancing your trading skills. With copy trading, you can thoroughly review and analyze these professional strategies, offering an excellent learning opportunity.
Profits derived from copy trading fall into the category of passive income within the realm of investment returns. The inclusion of investment products for passive income diversifies your investment portfolio. For novice traders, passive income can help counterbalance the risks associated with active income trading strategies. This concept is similar to investing in mutual funds, where professional fund managers, while not guaranteeing returns, can help mitigate risks to a certain extent.
Copy trading's full automation enables participation even when you have other commitments. This newfound freedom allows you to allocate your time to further market research, engage in personal interests, or socialize. Consequently, you can completely evade the exhaustion and negative emotions often linked to prolonged market monitoring and the apprehension of missing trading opportunities.
When traders use their own capital in high-risk investments, extreme emotions can disrupt rational trading behavior, especially during periods of substantial gains or losses. These emotions often result in suboptimal trading decisions. Copy trading effectively mitigates this issue by shielding your emotions from influencing manual trading choices.
Traders with a strong track record in futures trading have the potential to attract substantial capital, which, in turn, can significantly boost their earnings.
It is important to note that copy trading does not guarantee profits. However, it offers a profit-sharing mechanism that triggers only when profits are realized. This mechanism, to a certain extent, alleviates the pressure on traders. Unlike traditional financial instruments like mutual funds, copy trading does not adhere to concepts such as "minimum return" or "excess return" sharing.
Copy trading translates into giving up some control, as you surrender the liberty to make trading decisions, even though the platform allows you to define risk parameters and select which trades to execute.
Although there is an opportunity to gain insights from seasoned traders through copy trading, the scope of learning is somewhat limited. Unless you possess a foundation of market knowledge, it can be challenging to understand the logic behind the decisions made by the traders you follow, as well as the reasons for the success or failure of their trades. When it comes to acquiring trading knowledge, nothing surpasses the value of personal experience, an aspect that copy trading does not facilitate.
The market is consistently unpredictable. A trader who reaped profits yesterday may find themselves incurring losses tomorrow. Therefore, it is important to bear in mind that past performance offers no guarantee of future results.
Sometimes, your trades may fail to execute at identical prices to those you are copying or might not execute at all. Such discrepancies may arise due to shifts in market conditions between the original trade and its copy trade, resulting in delays, such as slippage. If there are no willing buyers for a particular asset, you cannot sell it, and conversely, if there are no willing sellers, you cannot buy. This risk tends to be more prominent when trading assets with lower liquidity, such as perpetual futures for uncommon crypto pairs. To mitigate this risk, it is advisable to follow traders engaged in mainstream markets.
Systemic risk encompasses geopolitical events and other rare occurrences that are difficult, if not impossible, to predict but possess the potential to influence the market.
Similar to followers, traders are exposed to market risk, liquidity risk, and systemic risk. In addition, traders also have to consider the following:
The MEXC futures trading platform is in a constant state of evolution, regularly updating and enhancing its futures trading features while introducing an array of new futures trading pairs. These external transformations require traders to engage in continual learning and practice, incurring a cost that traders must bear themselves. Thus, to excel as a MEXC trader, one must continuously refine one's skills and grow through persistent learning. Any hint of complacency could result in being edged out by the ever-evolving market.
It is important to note that becoming a MEXC copy trader entails meeting specific requirements. You must have signed up as a user on MEXC and completed KYC verification. Additionally, MEXC may impose particular trading volume requirements.
Copy trading is the simplest way to participate in trading, as it involves replicating the actions of seasoned traders. It is especially beneficial for novice traders, allowing them to enter the market without any prerequisite knowledge and offers them a chance to gain insights from seasoned traders. However, like any trading strategy, copy trading comes with its drawbacks and inherent risks. Essentially, you are entrusting your financial control to someone you have never met. Furthermore, if you limit yourself to merely observing others' trades, you might miss out on real-world experience and gain only a finite amount of knowledge. In the end, copy trading serves as a stepping stone for long-term engagement in trading. As you gain market knowledge and build an initial capital base, you should venture into independent trading.
Risk Warning: Trading involves risk and investments should be approached with caution. This content does not constitute investment advice. Please make investment decisions based on your personal investment objectives, financial situation, and risk tolerance.