Is Copy Trading Safe?

Users have concerns if copy trading is safe. It is mainly about 2 factors. The first concern is whether the ‘link process’ of copy trading safe. In order to copy the trades, both trader and follower need to provide their live trading account passwords. The second concern is whether the copy trading is a safe way to participate in the financial markets trading activities. In other words, can the copy trading (plus any built-in Risk Protection features) help follower make money? Are the activities of copy trading profitable? The follower will have this concern because the follower will have to rely on the trader’s performance to make a profit. Even though the follower can set up the strategies of copy and risk management settings so that it can protect the follower to some extent, whether it is profitable or not will still be based on the trader’s trading performance. Therefore, are there any Trader’s Selection Features and Risk-Protection Features help follower make money from copy trading activities?   Now let’s have these discussed below.

1. Is the ‘link process’ of copy trading safe?

As we mentioned previously, the Followme copy trading social network provides risk protection for both trader and follower. The important feature to mention, is the FollowGuard. FollowGuard is the risk protection tools by Followme. FollowGuard provides double ends protections in a variety of ways: The front-end supports user-defined follow mode and protection modes, while the backend automatically handles operational risk such as abnormal trading conditions and provides all-round real-time monitoring, ensuring the security of following and the data protection. It contains the detailed practice including equity protection, intelligent order makes up, intelligent copy, advanced setting, etc. More importantly, the whole copy trading account opening process contains privacy information protection rules so that it ensures your personal details will not be disclosed during the common business practice process.

2. Can the built-in Risk Protection features help copy trading activities make money for the follower?

No one wants to lose money in trading. That’s why more and more people participate in copy trading. Taking advantage of someone else’s trading experience and better performance is what the idea of copy trading about. It does create opportunities for the follower to increase trading performance. However, there is no guarantee that such activities can make money for the followers 100%. Let’s talked about some features to help followers to increase the probability of copy trading. They are FollowRank, and some other Risk Management features.

FollowRank – Find a good trader to copy

FollowRank is a trader account rating system made for the follower. If you are a follower, the first thing you will think about is how can I find a good trader that I like and trust. Firstly, you can customize your own criteria for filtering the traders and find the performance you like… Secondly, FollowRank, the scientific trader performance rating system and trade’s maximum account drawdown commitments provide followers with the references of how to select the good traders.

The ranking system contains the practice of scientific evaluation of traders, data linear regression, weighted scores and daily update.  The rating is based on the trader account's recent 13 weeks of trading performance. It calculates the trader’s scores from five factors. These five factors are the account's Profitability, Stability, Risk control ability, Casual profit, and Capital size.

Apart from the good trader ranking result, Follower can also check more details of a trader selected. The details of a trader account include ample report on the performance figures. They are Profit Chart, Equity/Balance Chart, Monthly Analysis Report, P&L Report, and Holding period Report. The trader can go through these reports and figures to ensure he is choosing the right trader.

The Risk Management practice 1 - Select the strategy to follow

When we are talking about copying trading, we consider how much a follower can make by linking his account with a good trader, but more importantly, is what is the maximum risk exposure a follower wishes to take.

Therefore, the last 2 things but surely not the least, are related to the risk control features provided in Followme copy trading functions. They are (1) how to set up the “Strategy to follow” before you start the following, and (2) what are the “risk management solutions in Account Setting” during the period of following. Again, these are essential for the copy trading system. It protects the follower in order to achieve consistent success.

Let’s see the first one, how to set up the “Strategy to follow” before you start the following. The follower can choose 2 major ways to follow a trade account. They are a fixed quantity to follow (one the left), and a proportional quantity to follow (one the right), as the figure shows. Moreover, it also provides followers with some hints to assist their better following performance including (1) backtesting result of the following profit and (2) suggested the following funds are needed in the following account. (please see the figure)

Risk Management practice 2 – extra protection to your follower account

Followme provides extra protection solutions, which makes the Risk Management practice stands out from its peers very obviously. Let’s see what are the “risk management solutions in Account Setting” during the period of the following.

1. Max DD (Min Equity) Protection: It provides the Maximum Drawdown or Minimum Equity Balance protection of the account. It means that once the follower account occurs a loss up to the maximum drawdown number that a follower set up initially, the copy trading function is immediately shut down. Therefore, the maximum loss you choose to accept will be kept at this level approximately (it slightly varies due to the trading condition offered by different brokers). It makes the follower stay away from keeping monitoring the account performance so they can focus on their own life without unlimited loss exposure.
2. Follow new order Permitted – it provides the follower with the manual opt-in and out to follow that selected trader. If the follower does not like the current trader or do not wish to follow the trader, the only thing he needs to do is to deactivate the button so that the following relationship is unchanged, but only the old position can be closed by no more new orders can be followers.
3. Max Trade volume to follow – Follower can choose to set up the maximum trading volume to follow. Once the maximum trading volume is reached, the new order will not be been opened even the linked trade places new orders. It gives the Follower the rights to judge and practice the maximum suitable trading volume of their own follower’s account.

Follower has freedom – Follower can overwrite the trader’s activities

Nevertheless, Follower has the freedom to “follow” or “STOP follow”. The follower can trade themselves manually in the trading account although the account has been linked to a trader’s account. It is always possible that the follower can overwrite any trading orders from the linked trader account, by manually opening or closing based on the follower’s own judgement.