Copy trading remains one of the most popular ways that people trade. In fact, both people who are looking to make a passive income and people who are looking to learn more about trading as a whole. But for people who are new to copy trading, there might be a multitude of terms that just go over their heads. Sometimes it can feel like traders are speaking a completely new language. Therefore, even if you want to get into copy trading, there are various terms that you have to learn first to make trading just a little easier.
Common Copy Trading Terms
Copy Trading Critic will usually tell you that there are a multitude of copy trading terms you need to remember before you start trading. Luckily though, none of them are too difficult and are fairly easy to understand the first time around. Some of the most popular ones include:
Symbol
For the forex market, a symbol refers to the currency that the individual is trading at the time. Also called currency ticker symbols, are used in the forex market since no currency is every bought or sold independently. Instead, it is always in relation with another.
Signal provider
Signal provider refers to the individual/trader who is identifying the signals to trade in. A follower or copier will follow the signals that they identify.
Fundamental Analysis
Fundamental analysis refers to the active process of understanding economic and political changes internationally. By understanding how countries are changing, traders will be able to predict how certain currencies or assets will fall or rise. Therefore, it is an essential step in ensuring that they take the right steps to bringing in a profit.
Stop levels
Stop levels refer to the limit that a trader sets on their live trade. This will usually take the form of price and will help limit the total loss that the trader will have to suffer from if the market is going against them.
Money Management
Money management refers to the process of controlling risk in any given trade and can singlehandedly determine the success or failure of a given strategy. Therefore, important questions need to be asked like how much each strategy and provider should be assigned.
Equity line
A graphical representation of the account balance of a signal provider is an equity line.
Social trading
Social trading refers to your ability to copy the trades that another investor is making. You can either copy from a single trader or from multiple others in a given trading network. Therefore, you will just by copying their trades without having an understanding of what they are doing.
Mirror trading
Mirror trading is fairly similar to social trading, in that you are also copying from another investor. However, instead of copying off the trades specifically, mirror trading copies the strategies of the trader, and applies them to the market.
Drawdown
Drawdown refers to a fall in the trader account’s equity. People will usually refer to it when the equity falls from a peak to a low. Copy trading brokers can express it in percentages or as whole values.
Technical analysis
This refers to the charts that a trader will use to interpret both, the behavior of future prices and the historic price action of a give trade.
Diversification
It is the act of incorporating a variety of trading assets and strategies in your portfolio in various market conditions, which allows you to hedge against risks. And with the help of copy trading, diversification becomes a lot easier.
Conclusion
Since copy trading has risen in popularity significantly, it only makes sense that you would want to give it a try. Not only does it make trading much easier, but it can even allow you to experiment with a variety of trading instruments in different markets that you would otherwise have to spend weeks trying to learn about.
