Fullerton Markets, a retail trading broker, announced today that it has launched a copy trading system. The system, called CopyPip, will enable traders to follow investors’ strategies and invest in the same way as them.
Copy trading has been a popular marketing hook for retail brokers for several years now. The theory is that it enables novice traders to simply copy the entire trading strategy of an experienced pro and start raking in cash.
If that sounds like a load of baloney to you, then you are not alone. After all, if you had a winning strategy in any field, why would you share it with others if it would be detrimental to you in the long run?
SquaredFinancial Launches New Partnership ProgrammeGo to article >>
Paying for your strategy
CopyPip attempts, as similar services in the market do, to offset this fact by providing commissions to signal providers – investors who make their trading strategies available to follow. This would conceivably offset fears that your precious strategy is going to be given away for free, but traders using CopyPip don’t have a lock-in period.
That means that someone could access your strategy, copy it and then cease ‘following’ you. This, in turn, would mean fewer followers and hence a decreasing commission. Most frustrating of all, people would be using your strategy without paying for it. Novice traders using the service are less likely to be put off by this as they don’t, from a commission-based perspective, stand to lose anything.
Indeed, there seem to be two key points that make copy trading attractive to new traders. It enables them to trade without having to learn the intricacies of the markets and they, in their minds, can get rich quick. There is certainly a logic to this, but it is exceedingly difficult, if not impossible, to think of a sphere of human activity in which knowing nothing of the details of the activity won’t preclude you from reaping the rewards that engaging in that activity brings.
Before strapping their deposit on to the coattails of a ‘professional’ trader in the hope that they’ll get rich quick, retail investors would be much better off learning the ins and outs of financial markets first. If they still feel the need to follow someone else’s strategy, so be it, but perhaps in taking the time to learn, they’ll be able to generate their own strategy.