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The Benefits of Copy Trading Forex

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Read Time: 10 - 15 Minutes


In this article, we go through everything you need to know about forex copy trading and how you can gauge the benefits and drawbacks it offers to both beginners and experienced traders.

  

What is Copy Trading?


Copy trading is software that is used to duplicate the trading strategies of selected traders.  

 
While this may sound like “mirror trading” (a technique used to mimic another trader’s strategies), the key difference is in copy trading the copying trader has their account linked to the account of the trader being copied. This means that whenever the trader being copied opens, closes, or alters a position these actions are also applied to the linked account (the copying trader).  



What’s the Difference between Social Trading and Copy Trading?


Before we dive into more details about copy trading, it’s important to distinguish between copy trading and social trading, as they are often mistakenly considered to be one and the same. Since we have already made clear what copy trading is about, let’s go into what social trading is, and how it might differ from copy trading. 


In essence, social trading is a combination of social media and investment. In social trading platforms, you can directly communicate with other investors, and exchange information about what trades to perform in a given time. This allows more people to collaborate. 


The main advantage of this is that you can analyse the trades yourself, meaning in some cases, you can try to see if there are any errors in making the trades before you execute them yourself. 


In mirror and copy trading, traders are in most cases using automated software to mimic the strategies of selected traders. 


In both mirror trading and social trading, you are not directly following someone’s trades, but are instead either automating their strategy (mirror trading) or manually following their strategy (social trading). 


In contrast, copy trading follows the trades of the selected trader, including when a position is opened and closed, as the accounts are linked. 


While social trading involves a closer look at trades and is great for people who want to learn trading by experiencing it first-hand, it also includes investing more time in research on the terminology and strategies of the industry.  


It should also be noted that with social trading, you might still be solely responsible for the trades that you perform. You only gain information from other traders within the social trading platform, and you can't automatically execute the trades based on other traders, as copy trading platforms allow you to do. 


In a sense, the main difference is in the way people approach trading in the first place.  


For those who are keen on learning everything about trading, social trading is a fantastic place to start. They gain knowledge along the way as they perform trades themselves. They copy other traders but also do their own research in the process, because they want to know the reasoning behind those trades.  


Copy trading, on the other hand, is for people who want a hands-off approach to trading, who prefer not to have to constantly monitor their trades. It’s for people who would rather just trust their trades to an experienced trader or someone they know personally.  




   Manual Trading     Copy Trading       Mirror Trading      Social Trading  
Beginner Friendly     No     Yes     No    Yes
Fully Automated
     No    Yes     Yes    No
Algorithmic     No    No     Yes    No

 


Why Should I Learn About Copy Trading?


These days, when markets are monitored around the clock, a variety of strategies are called for and across various asset classes.  


Investors might favour some strategies they have applied for a long time and with good results, but there’s no guarantee that those strategies will always work in the future. 



History of Copy Trading


While popular now, the first iteration of copy trading goes back to 2005, when researchers found a way to create an algorithm that could replicate trading behaviours.  


This use of algorithms quickly grew in popularity as investors and brokers picked up on it. This became the birth of mirror trading. 
 

However, it wasn’t long until brokerages and popular traders used the popularity of mirror trading to instead allow investors to link to their account, and for a small fee, allow investors to get complete exposure to their positions and strategies. 


Copy trading has turned out to be a unique way of getting access to the financial markets. The innovation spread to others who wanted to invest in foreign exchange, crypto or stocks but didn't have the time to follow markets, analyse information, or devise strategies they weren’t even sure would work.  



What Are the Benefits of Copy Trading? 


Copy trading has several benefits. These fall under two main categories: Income and Learning.  


You Earn Passive Income


Copy trade forex allows for passive income. You only need to set up your account, find a reputable investor that has hopefully been investing or trading for many years and has a reliable track record with few bumps along the road in their performance. Ideally, they take less risk than the average investor by holding fewer drawdowns and accessing markets you wouldn’t either get exposure to (e.g., Forex, Commodities etc.).  


In a way, to copy trade forex is to ride the wave that the experienced investor is creating and profit from it. 


Of course, investing in this way is not entirely risk-free. That is what makes the other benefit category, learning, more significant if you’re a beginner trader. 


You Learn from the Experts


One crucial benefit of copy trading, which beginners should be aware of, is that it can save them tons of time learning the fundamentals of forex trading.  


Learning how to analyse market information and plan a strategy from scratch can take a long time. Copy trading helps shorten that learning process by following the market in real time with actual skin in the game.  


You can experience how seasoned traders approach trading and pick up ideas from them. Eventually, you may even make your own variations of their strategies.  


You Learn How Experts Handle Losses


That doesn’t mean you should blindly trust what an established investor is doing with their trades. Even experts make mistakes.  


In fact, good investors study their past losses to identify errors in their approach and make adjustments, intending to minimise future risk further. 


Among the things you can also learn from copy trading, then, is how to recognise these mistakes for yourself, despite an expert’s opinion or because of an expert’s mistake, when a trade will result in a loss. 


And from the expert traders’ example, you learn how to learn from your mistakes. 



What Are the Drawbacks of Copy Trading?


Like all other investment strategies, copy trading has its fair share of disadvantages across any platform.  


Even Experts Make Mistakes


As mentioned before, even professional investors can make mistakes. They might trade something they wouldn’t normally trade, or refuse to close a trade when they should have. These are common mistakes we can all make due to our hidden biases. It's best, therefore, to partially monitor your investments as well, and not passively hope for the best. Ideally, you’re following along and can understand the reasoning for why the trader you’ve followed has done what they’ve done.  


Investing Involves Costs 


For people keen on investing in high volume, the commission fee that professional investors take can sometimes add up if money has already been lost through a bad or missed strategy.  


With a copy trading platform like Fusion’s, you only pay fees for any positive performance. There are no hidden management fees or entry or exit fees. You simply agree to the performance fee when signing up and away you go.  



Dealing with Drawbacks


Like everything else, copy trading has its pros and cons. With careful decision-making, proper research, and intelligent risk management, you can maximise the benefits of copy trading and minimise its drawbacks.                                      



Final Thoughts 


There isn’t much difficulty to copy trading. All you're doing is finding someone you know with a decent track record which has steady gains with minimised risk and hopefully mimicking their strategies for trading in the markets.  


That can be done by looking at investors’ trade history and analysing their trade entry (both buy order for long positions and sell order for short positions). At least two years of history is a good place to start.  


Overall, copy trading can minimise the risk of capital loss if you have found the right trader. For professional investors already familiar with various strategies, copy trading is still a good option - it might get you access to an uncorrelated asset class they might not have traded before or sharpen their own skills by following and learning from someone else.  


If you’d like to get started with copy trading, Fusion offers a range of options for both beginner and seasoned traders. Fusion+ allows traders to copy trade some of the most successful traders in the financial markets.  
 

We also offer a copy trading service through our partner DupliTrade. For those who wanted more of a social trading experience we also provide that with our partner, Myfxbook Auto Trade. 


If you’d like to learn more, contact us and we’ll happily answer any questions you have about copy trading, Forex or CFDs.  




FAQs


What’s the main benefit of copy trading? 


The main benefit of copy trading is to automate the investors' trading and minimize risk. It can also prevent slippage in buy and sell orders because most copy trading platforms are fast and automated. 


How does copy trading work? 


It works by copying the strategies of other experienced investors and applying them to your portfolio. 


Can I use MT5 and MT4 for forex trading? 


You can use MT5 and MT4 for forex trading. While MT4 is explicitly designed for forex investments, MT5 has a range of other assets, both centralized and decentralized. 


What are the risks of copy trading? 


The main risk of copy trading is that even experienced traders whose strategies you might copy can make mistakes. You have to monitor your own investments to spot issues at once if something goes wrong. 


Thousands of brokers are ready to help you invest. Experience copy trading with MT4 or MT5. Sign up now! 


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Relevant articles

Beginners
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The Fibonacci Cheat Sheet

Read Time: 6-7 minutes

 

Essential Ratios Every Beginner Trader Should Know. The Fibonacci sequence and the golden ratio have long fascinated mathematicians, scientists, and artists. Their influence extends across every aspect in life and can be observed in nature, architecture, and even the financial markets. Fibonacci-based tools are readily available and can assist in identifying entry and exit points, retracement lengths and more.

   

What is Fibonacci and Why Does It Matter in Trading?

   

The Fibonacci sequence consists of a series of numbers where each value is the sum of the two preceding numbers, starting from 0 and 1. For example, 1+1=2, 1+2=3, 2+3=5, and so on. When we continue this pattern we get:

   

0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233...

   

Taking it one step further, if we observe the mathematical correlations between these numbers, we identify a range of ‘ratios’. For example, if we divide 21 by 34, we get 0.618%. If we divide 21 by the number two spots to the right (55), we get 38.2 and so on.

   

This mathematical constant appears in various natural and human-made structures, from spiral galaxies to architectural designs, and even nature.

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In trading, Fibonacci ratios can help analyse price action, pinpointing areas where market trends may pause, reverse, or accelerate. By learning to apply these ratios, you can identify potential support and resistance levels, retracement zones, and projected price targets, ultimately giving you better entries and exits on your trades.

   

Breaking Down the Key Fibonacci Ratios

   

The most widely used Fibonacci ratios in forex trading originate from the relationships between sequence numbers. As an example, some of the most commonly used in trading include:

   
         
  • 23.6% – A minor retracement level often observed in strong trends.
    •      
  • 38.2% – A commonly used retracement level where price corrections may occur.
    •      
  • 50% – Not an official Fibonacci ratio, but significant due to psychological factors.
    •      
  • 61.8% – The golden ratio, a crucial level for support and resistance.
    •      
  • 78.6% – A deeper retracement level where strong reversals may occur.
    •      
  • 161.8% – A common extension level used to forecast potential price targets.
    •    
   

These ratios are applied using Fibonacci retracements and extensions.

   

How to Use Fibonacci Retracements   

   

We have explained Fibonacci retracements as one of the indicators that we have discussed here on our blog before. A trend is a significant price movement in one direction, followed by a price movement in the opposite direction, followed by a price movement in the direction of the initial trend. You can use Fibonacci retracement levels to determine where these pullbacks might find support or resistance. You can get better entries and/or exits on your trades by doing this.

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Fibonacci Retracements

 

For example, during a bullish trend, price may retrace to the 38.2%, 50%, or 61.8% level before continuing higher. This can also be observed in a downtrend, where these levels can serve as potential swing points where price might pause or reverse before resuming its downward trend.

 

How to Use Fibonacci Extensions

 

While retracements focus on pullbacks, Fibonacci extensions project potential price targets beyond the original price movement, using the same ratios. These levels help estimate how far price may travel after a retracement completes – ultimately leading to better profit targets/exit points.

 

The 161.8% extension, often called the "golden mean," is one of the most significant levels. It frequently acts as a target in strong trends, marking potential areas where price may consolidate or reverse.

 

Extensions are particularly useful for setting profit targets, as they provide logical exit points based on prior price action.


A graph with a line and a dotted line AI-generated content may be incorrect.

 

Fibonacci Clusters: Combining Multiple Levels for Strong Trade Setups

 

A Fibonacci cluster forms when multiple Fibonacci levels from different price swings converge at a similar price point. These clusters can help identify the stronger swing points, which often lead to market reactions.

 

Traders often use these clusters for:

 
       
  • Identifying precise entry points
    •    
  • Setting stop-loss levels
    •    
  • Establishing profit targets


    •  




 
   

Figure 1 – AUDUSD Weekly Chart

   
   

For instance, if a 61.8% retracement from a major trend aligns with a 161.8% extension from a smaller move, the resulting zone becomes a high-probability trade area.

 

Step-by-Step Guide to Using Fibonacci in Your Trading

 

To effectively use Fibonacci techniques in forex trading, follow these steps:

 
       
  1. Identify Key Price Swings – Look for significant highs and lows as reference points for Fibonacci retracement or extension tools. It’s important that you’re drawing the tool using the correct swing high and lows of each move.
    2.    
  2. Plot Fibonacci Levels – Use charting software, such as MetaTrader or TradingView, to overlay Fibonacci levels on key price movements.
    3.    
  3. Look for Areas of Confluence – Check if the Fibonacci levels align with other technical indicators, such as moving averages, trendlines, support/resistance zones, or even other Fibonacci levels.
    4.    
  4. Observe Price Reactions – Monitor how the market responds to each Fibonacci level, looking for confirmation through price action signals like candlestick patterns.
    5.    
  5. Manage Risk Effectively – Define risk-reward parameters using Fibonacci-based stop-loss and take-profit levels.
    6.  
 

Final Thoughts

 

The Fibonacci sequence and golden ratio help to structure the way the market behaviour is analysed, and the major price levels are identified. You can enhance your technical analysis and, by result, decision-making, by applying Fibonacci retracements, extensions, and clusters.

 

However, it is crucial to mention that no tool is 100% accurate and that the use of Fibonacci tools can greatly enhance a sound trading strategy by providing more potential entry and exit points. However, like any other indicator, there are no guarantees, so it is recommended to look for a reaction and/or confirmation of each Fibonacci level before making the trade.


18/03/2025
Beginners
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Leveraging Economic Indicators

Read Time: 6 minutes


For successful forex trading, economic indicators are essential tools in understanding market trends and predicting potential currency movements. These indicators, such as GDP, employment data, inflation rates, and more, provide a window into the economic health of a country, which ultimately influences currency values across the market.  

Understanding the influence of economic indicators allows you to make informed decisions based on more accurate analysis, increasing the likelihood of profitable trades.  



Table of Contents






Key Economic Indicators



Gross Domestic Product (GDP)


GDP is the total market value of all goods and services produced within a country, reflecting its economic health.

A rising GDP often signifies a strong, growing economy, which can boost a nation’s currency due to investor confidence. Conversely, a declining GDP might signal economic trouble, potentially weakening the currency. For forex trading, GDP data can help identify long-term currency trends, particularly when compared across different nations.



Employment Data


Employment data is a major economic indicator with a substantial impact on currency values, particularly the Non-Farm Payrolls (NFP) data in the United States.

The NFP measures employment changes outside the farming sector, providing a snapshot of the U.S. job market. When job creation is strong, it suggests economic health, often strengthening the currency as investors and traders feel confident.

Weak employment figures can suggest economic issues, potentially leading to currency depreciation. Since employment is closely tied to consumer spending and economic stability, this data can be very valuable for traders.



Inflation Rates


Inflation, primarily measured by the Consumer Price Index (CPI), reflects the rate at which prices for goods and services increase.

Moderate inflation is generally healthy, indicating a growing economy. However, high inflation can devalue a currency as purchasing power declines. Central banks often adjust interest rates in response to inflation; if inflation is high, they may raise rates to control it, which can attract foreign investors seeking higher returns, thus strengthening the currency. Understanding inflation’s impact on interest rates and currency valuation is vital for forex traders.



Interest Rates


Interest rates are the cost of borrowing or the return on savings, set by central banks to regulate economic activity and influence currency value.

Interest rates are among the most influential economic indicators in forex. Central banks set these rates based on economic conditions, adjusting them to either stimulate or cool down the economy. Higher interest rates often attract foreign investment, increasing demand for the currency and boosting its value. Conversely, lower interest rates can make a currency less appealing to investors, leading to depreciation. For forex trading, interest rate changes and the policies of central banks (such as the Federal Reserve in the U.S. or the Reserve Bank of Australia) provide critical insights into likely currency movements.



Consumer Confidence Index (CCI)


The Consumer Confidence Index measures consumer sentiment and expectations regarding the economy.

High consumer confidence can indicate increased spending, which drives economic growth, while low confidence suggests economic uncertainty. CCI is considered a leading indicator, as consumer sentiment often precedes actual economic changes. When consumers feel positive about the economy, the currency may strengthen; when confidence drops, the currency may weaken. Forex traders use the CCI to anticipate changes in spending behaviour and overall economic direction.




Interpreting Economic Indicators



In forex trading, interpreting economic indicators requires understanding both individual data points and the relationships between them. Economic indicators can influence currency values in varying degrees, with some holding more weight than others. Traders must also consider correlations, as indicators like GDP and employment data often move together, giving a clearer picture of economic health.

One challenge traders face is managing contradictory signals. For example, strong employment data may suggest a strong currency, but if inflation is simultaneously high, it could lead to fiscal and monetary policy changes, ultimately impacting the currency differently. Weighing the significance of each indicator helps traders decide when to take action and which indicators align with their trading objectives.



Essential Economic Indicators and Practical Application


- For traders just starting with fundamental analysis, some economic indicators offer a straightforward approach to understanding market dynamics:

- Non-Farm Payrolls (NFP): Released monthly by the U.S. Bureau of Labor Statistics, NFP provides a quick look at employment trends, making it a critical indicator for traders.

- Consumer Price Index (CPI): CPI reflects inflation and purchasing power, directly influencing central bank policy and forex rates.

- Central Bank Interest Rate Decisions: Rate changes have immediate and often lasting impacts on currency valuation, making them a fundamental factor in forex trading.

You can find the details of every economic data event using our Economic Calendar.

Accessing timely and reliable economic data is crucial. Many traders use economic calendars, such as our one here, which provide release dates for upcoming economic data, allowing them to plan trades around these announcements. Economic calendars are invaluable tools for tracking data releases, setting alerts, and managing expectations for market volatility.

It's also important to be mindful of common misinterpretations, such as assuming that a single indicator will drive long-term trends. Forex markets are influenced by a multitude of factors, so it’s essential to view each indicator within a broader economic context.




Synergising Economic Indicators with Technical Analysis



Whilst economic indicators provide insights into a currency’s underlying strength, technical analysis offers real-time insights into price patterns and potential entry points. Combining fundamental and technical analysis enables traders to balance economic data with chart patterns, enhancing trade timing and precision. For instance, fundamental economic indicators can provide you with a long-term bias, and technical analysis can be used to find entries and exits in the direction of that bias.




Advanced Trading Techniques



Timing Your Trades


Timing is crucial when trading around economic data releases. Pre-release analysis allows traders to set expectations based on market consensus, whilst post-release strategies can help manage volatility once the data is out. Our Economic Calendar is an indispensable resource in this regard, assisting you in aligning trades with significant data releases and prepare for potential shifts.


Integrating Indicators into Your Trading Strategy


Developing a comprehensive trading strategy involves diversifying currency pairs based on each currency’s economic indicators. For instance, trading a U.S.-based currency pair based on NFP data, while trading an Australian pair based on the RBA’s interest rate decisions, can provide a balanced approach. Incorporating adaptive risk management around key data release dates can help traders mitigate the risks associated with high-impact news events.




Conclusion


Economic indicators are invaluable resources for forex traders, offering insights that can guide trading strategies and improve profitability. By understanding these economic indicators, you can better anticipate currency movements and make informed decisions. However, mastering these indicators requires continuous learning and constant observation.

Ultimately, leveraging economic data within a broader market analysis framework supports responsible trading practices and provides you with an additional source of information to make better trading decisions.


Remember: Successful forex trading requires a balance of economic insight, technical skill, and disciplined risk management. Stay informed, practice consistently, and adapt your strategies to ever-changing market conditions.

07/01/2025
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