Thanks, I think this is one of the most important questions to ask before trying copy trading.
For me, the biggest danger is forgetting that you are still taking the trader’s risk, not just copying their profits.
Leverage is probably the first thing I would pay attention to. With futures, leverage can make both gains and losses much larger. A trader might show a great ROI. But if that result comes from aggressive leverage one bad move can turn into a very large loss very quickly.In extreme cases the position can be liquidated. That is why I would never look at ROI without also checking the trader’s drawdowns and how aggressively they trade.
The other big risk is that the trader can simply change.
Maybe they traded conservatively for months, then suddenly started taking much larger positions or using more leverage. If you are still copying them automatically your risk changes too.
This is why I mentioned in the post that copy trading is automated, but it should not mean completely forgetting about the trader. I would still check their activity from time to time and ask myself: Would I still be comfortable copying this person if I were making these trades myself?
There is also something else people sometimes overlook. A trader can have a very good history and still go through a bad period. Past performance does not guarantee that the same strategy will continue working especially when market conditions change.
So personally I would not treat copy trading as “find a good trader and leave it running forever” I see it more as choosing someone whose risk level fits you, starting small and continuing to monitor whether their behaviour still makes sense.
And if losing the amount you allocate would cause you serious financial stress, I would not put that money into copy trading in the first place.
The convenience is real but the risk is real too. That is probably the most important thing to understand before starting.
Thanks for the clear answer, @copytrading! It's useful to hear that you still take on the trader's risk and not only the profits. The points about leverage leading to liquidation, and about checking drawdowns together with ROI, are the ones I'll remember, along with the warning that a conservative trader can later become much more aggressive.
I'll keep your rule in mind: only money whose loss would not cause serious stress. One last question: how often would you review the trader you follow, for example weekly or monthly, and what would be the first warning sign that makes you stop copying?
Matteo - Ca' Paradiso, Cagli 🌿
www.caparadiso.com
Original message
Grazie per la risposta chiara, @copytrading! È utile sapere che si assume il rischio del trader e non solo i suoi profitti. I punti sulla leva che può portare alla liquidazione e sul controllare i drawdown insieme al ROI sono quelli che mi ricorderò, insieme all'avvertimento che un trader prudente può diventare in seguito molto più aggressivo.
Terrò a mente la tua regola: solo denaro la cui perdita non causi un forte stress. Un'ultima domanda: ogni quanto controlleresti il trader che segui, per esempio ogni settimana o ogni mese, e quale sarebbe il primo segnale d'allarme che ti fa smettere di copiarlo?
Matteo - Ca' Paradiso, Cagli 🌿
www.caparadiso.com
Posted via HiveSuite
I’d check weekly to keep an eye on things, but judge performance over a longer period. For me, the first red flag would be a sudden increase in risk or much bigger drawdowns than before. I wouldn’t wait for a major loss to stop copying. Protecting your capital comes first.