The Ultimate Guide to Copy Trading Crypto (2023)

As the saying goes, success breeds success. Unfortunately, the opposite can also be true, which is one of the reasons why many recent crypto investors have been left in the cold by the prolonged crypto winter, holding stacks of depreciating cryptocurrencies. Many have found alternative investment strategies, from HODLing and dollar-cost averaging to margin trading, but the fact remains that large numbers of investors who entered the market at its peak back in November 2021 have been confronted with the reality of unsuccessful positions.

But what if there was another way to trade? What if there were a way to find successful trading strategies and then use them for your benefit? And if we told you that it was actually possible without having to code complicated trading algorithms yourself, would you believe us?

Let’s say that aren’t a coding professional or quantitative analyst. Perhaps you have an interest in the future of money and want to gain some exposure to cryptocurrencies. Or let’s say that you have a fair bit of trading and/or programming experience, but don’t necessarily have the time to get bogged down in building, testing, and optimizing your own trading strategy. What are your options?

Enter crypto copy trading. In the following article, we’ll introduce you to this accessible, popular, and profitable investment approach by covering some of the main points as well as the many benefits and a few of the drawbacks before exploring the best crypto copy trading platform.

Crypto Copy Trading Explained

So what is crypto copy trading? As the phrase suggests, it’s a process in which a crypto investor (or group of crypto investors) copies the trades of an expert trader. Remember what we said about success at the very beginning of this article? By copying the trades of a successful crypto investor, one can derive profits from someone else’s expertise and experience, building a track record of success that leads to further successful trading.

But what exactly is involved in the actual process of crypto copy trading? As a crypto investor, you can copy the trades of experienced investors automatically by renting their trading bots. Now, expert crypto traders use automated trading strategies, i.e., crypto trading bots, rather than manually trading crypto for a number of reasons, including greater efficiency and speed, removing emotions from the trading process, risk diversification, and the ability to test and optimize their strategies using historical data. So, when you as an investor rent a trading bot made by an expert trader, you are effectively copying their trading strategy. And since everything is automated, the entire process saves you time and effort as well as increases the likelihood of a positive return on your investment.

The following definition from an academic research paper offers surprisingly clear and succinct description of the general process of copy trading:

This feature enables investors to replicate – in real-time and in their own accounts – the actual trades of other investors. An investor is allowed to follow other traders for a fee and have the platform automatically execute the trades of other traders on her own account in a real time manner.

Nevertheless, the more you read about copy trading, the more you realize that it sounds remarkably similar to practices such as social trading and mirror trading. In fact, it can be quite difficult for newer investors to disentangle the distinctions between copy trading, social trading, and mirror trading, which is why it’s so important to define our terms.

Copy Trading vs Mirror Trading and Social Trading

Crypto copy trading is actually part of a larger phenomenon referred to as social trading in which a retail investor can manage wealth by directly following the financial advice of other, (usually) more experienced traders. The process typically involves the sharing of opinions on markets via dedicated social media platforms in which traders can make friends, post opinions, and communicate with other investors, all of which can then be used to make trading decisions. One surprising recent example involves newbies trading investment tips on TikTok.

Let’s consider how copy trading differs from mirror trading and social trading.

• Copy trading involves copying trades made by one specific trader using trading bots.
• Mirror trading is when a trader uses algorithms to determine the best general strategy based on the actions of a group of traders.
• Social trading involves observing the trading behavior of other traders (expert or otherwise) and following their strategies using either copy trading or mirror trading.

If it sounds like variations on a theme, then you’re not far off the mark. Let’s think about how these practices developed, which should clarify things. Investopedia defines copy trading in the following way:

Mirror trading is a methodology of trade selection. It is a strategy that allows investors to copy the trades of experienced and successful forex investors and implement the same trades, in almost real time, in their own accounts. Mirror trading was initially only available to institutional clients but has since been made available to retail investors through various means. Since its inception in the mid- to late-2000s, mirror trading has inspired other similar strategies, such as copy trading and social trading.

As you can see, the terms are used interchangeably (“copy” and “mirror”) even by a highly trusted source, which can be confusing when trying to differentiate between copy trading software, copy trading strategies, mirror trading, and even social trader tools. What the above quote (and article) is actually describing is copy trading. Let’s take a look at another definition – this one from Wikipedia:

Mirror trading is sometimes also referred to as copy trading although copy trading differs slightly from mirror trading in the way that accounts are linked. In copy trading, the trader directly copies the moves of an individual successful trader; whereas in mirror trading, investment decisions are based on algorithms developed from trading patterns of a number of successful traders.

The above-mentioned examples offer clear and concise explanations with easy-to-understand definitions, while also paying attention to the finer distinctions between copy trading and mirror trading within an overarching experience of social trading.

Advantages of Copy Trading Crypto

As with everything in life, there are benefits and drawbacks to consider when using copy trading, ones that you should always keep in mind as an investor when selecting a bot for copy trading on a crypto copy trading platform.

These include 1) greater transparency since each and every trade is observable, 2 ) far greater control over trade executions by individual traders, 3) lower fees, and 4) lack of exposure to unscrupulous financial advisors and financial advising services, which can often have hidden agendas.

Copy trading crypto provides data transparency

Depending on the crypto copy trading platform that you’ve chosen, you should have access to a full range of statistics and metrics. Within social trading, however, there is something called the “transparency-revenue conundrum.” Trading platforms have to work out a delicate balance when it comes to transparency. In the first instance, they have to release traders’ trading information as quickly and transparently as possible in order to equip followers with the requisite data to make an informed decision as to whether to follow a particular trader.

However, too much transparency may lead to losses for the platform, as followers may be able to employ certain techniques to avoid paying following fees. Therefore, there is a need for information transparency (i.e., detailed versus aggregate trading performance) and the timed release of data (i.e., immediately or with a delay). Since speed is crucial, especially in a fast-paced trading market such as crypto, copy trading platforms tend to release as much data, including aggregated metrics and specific trade-level info, as quickly as possible.

Copy trading simplifies crypto investing

Investing in crypto can be particularly complicated in light of the market’s volatility. Professional traders are adept at this complex, painstaking work, which requires years of experience and expertise as well as an in-depth understanding of markets. The simple fact is that most people don’t have the requisite skills and experience, which is why most people aren’t professional traders. Copy trading, however, greatly simplifies crypto investing, making it an excellent way for non-professional traders to add crypto assets to their investment portfolios. Instead of spending seemingly endless amounts of time creating a trading strategy, investors can simply evaluate the strategies of experts and then copy the one that meets their needs in just a few clicks.

Copy trading crypto offers greater flexibility

Right, so you’ve done your research. You checked the data. You’ve decided to copy the moves of a successful trader. There’s only one problem: the successful trader isn’t exactly turning out to be, well, successful. What can you do with the strategy that you’re copying?

With copy trading, you’re always in control.You can decide to unfollow the trading strategy whenever you decide that copying someone no longer makes sense financially. One of the beautiful aspects of copy trading is that traders are incentivized to be successful, otherwise few people would continue to copy them—one hand washes the other.

Potential Drawbacks of Crypto Copy Trading

It should be clear by now that copy trading has numerous advantages and can often be one of the best solutions for many traders, but there are some possible downsides of which you should be aware.

Lack of information about the crypto copy trading strategy

While trading platforms have increasingly erred on the side of almost complete information transparency when it comes to a bot creator’s automated trading strategy, how much do you really know about that “expert” trader and his/her trading strategy? Can you trust them with your hard-earned cash or coin? And how can you tell if their follower numbers are legitimate or simply inflated through nefarious black hat techniques? The age-old adage applies: caveat emptor or buyer beware.

Unfortunately, the vast majority of crypto copy trading platforms offer unproven automated trading strategies by anonymous creators, which is one of the reasons why you should only choose a crypto copy trading platform that offers clear data on both the creators and their strategies.

Unexpected crypto volatility and copy trading

Sure, success is a wonderful thing, especially when you’re piggybacking off of someone who has done the heavy lifting for you. But with the good comes the bad. What happens when the trader that you’re following encounters a flash crash, a sideways market, or even a bear market? If you think that another FTX can’t or won’t happen, then think again.

While you stand to profit by copying the trades of a successful trader, you’ll also sustain losses when the trader’s bot encounters a losing streak. They’re losses are now your losses, and you’ll be faced with the uncomfortable decision of either continuing to follow the trader as you both ride out the troubled waters of crypto markets or simply abandon ship and search for more profitable traders to follow.

Crypto copy trading and fees

While some of the best things in life might be free, profitable trading bots are not one of them. And given the levels of complexity and time involved, why should they be? Professional copy traders will require a commission payment for their services, and quite rightly so! Depending on your level of investment, though, these fees can quickly eat away at your bottom line, turning profits into losses if you’re not careful.

Is Crypto Copy Trading Profitable?

The short answer? It absolutely can be. After all, social trading has continued to surge in popularity and with good reason. If people weren’t making money from it, then people wouldn’t continue to do it. It really is that simple.

But there are things that you should bear in mind when considering copy trading and profitability. Just as businesses must know their customers, so too should you do your due diligence when picking a reputable trading platform. Copy trading should only be done through a trusted source, and we highlight one of the best crypto trading platforms below.

Is Copy Trading Crypto Good for Beginners?

Copy trading provides an excellent entry point into the world of crypto trading, whether you’re a complete beginner or someone with a bit of experience.

Since beginners are naturally in the early stages of their trading careers, copy trading allows them to learn from the best, copying successful, profitable traders and their strategies with a minimum amount of time, energy, and resources.

Additionally, instead of having to master increasingly complex skills and information related to algorithmic investing and market dynamics, newer crypto investors can rely on and learn from the experts, thereby minimizing their risk and increasing their knowledge throughout the investment process.

How to Get Started Copy Trading Crypto

The first step involved in crypto copy trading is arguably the most important. Choosing the best copy trading platform can often mean the difference between short- and long-term success and dashed hopes.

Whereas most articles will advise traders to choose the right trader to copy, you’ll want to find the best trading platform. Remember: success breeds success. The best platforms will attract the best copy trading bot creators.

The Best Crypto Copy Trading Platform—The Trality Marketplace

Unlike the vast majority of other trading platforms, Trality’s Marketplace is a one-of-a-kind space that brings together crypto trading bot creators and investors for mutually beneficial purposes. While most platforms rely exclusively on anonymous bot makers and unproven crypto trading bots, Trality’s Marketplace is a carefully curated space with hand-picked creators and the best bots available, enabling both creators and investors to earn solid passive income returns.

Investors can rent profitable bots tailored to specific risk tolerances (low, medium, and high) and individual investment goals. A full suite of metrics is available, allowing investors to decide on a bot based on clear, quantifiable data.

Receive updates in real time whenever changes are made to a bot Should a bot underperform, investors have the ability to unfollow it at any time and select another bot. With just a few taps in the Marketplace’s mobile app, investors can easily leverage the expertise of professionals by renting the most trusted bots on the market.

Bot Creators can now monetize their bots and earn passive income from investors around the world by having their bots listed on Trality’s Marketplace. Most importantly, bot algorithms remain completely private, meaning that each creator retains full IP rights.

All bots on the Trality Marketplace must pass a rigorous screening process by our Bot Selection Committee, which consists of industry experts with decades of collective experience. Key metrics used when selecting bots for the Marketplace include risk-adjusted return, minimum trading activity, and time under water. And since the crypto market is a volatile one, all bots are backtested in different market conditions such as bull, bear and sideways market regimes to ensure consistent returns.

It’s this uncompromising commitment to a transparent bot evaluation process that distinguishes Trality’s Marketplace from generic, black-box alternatives.

Trality’s Marketplace and index-tracking bots

These bots are ideal for new(er) crypto traders. Trality's automated index tracking portfolios are diversified baskets of crypto-assets that re-balance automatically and provide you with a simple, reliable and maintenance-free way to gain exposure to the crypto market.

Trality’s Marketplace and reversion strategies

Reversion strategies profit from noise in the markets. In this case, investors trade the relative value with the expectation that the prices will return to a long-term average. These bots will have a smooth PnL when traded under the right conditions.

Trality’s Marketplace and trend-following strategies

Trend-following strategies are designed to work well in directional markets with low noise.

Trality’s Marketplace and multi-strategy bots

Multi-strategy bots utilize different trading styles depending on the market conditions. They can be considered a multi-tool, rather than specifically requiring certain market conditions.

Trality’s Marketplace and intraday bots

Intraday bots are designed to require more hands-on management. They will perform well under the right conditions, but require a knowledge of market dynamics in order to be applied correctly.

Getting Started on Trality’s Marketplace with the Trality Wallet

Investing in crypto should be convenient as well as safe and secure, which is why Trality has partnered with Binance, the world’s largest and most trusted cryptocurrency exchange, to offer the Trality Wallet.

The official Trality Wallet has a number of user-friendly features for seamless transactions, allowing users to directly deposit funds and immediately start trading with automated strategies without the need to configure additional settings between an exchange and Trality.

The Trality Wallet—perfect for trading crypto

While everyone knows that wallets are used for storing funds, the Trality Wallet excels as a trading wallet, offering additional ease-of-use and convenience. In three simple steps, users can create, fund, and start automatically trading crypto with trading bots—all in one place.

After a standard KYC process, simply add funds to the Trality Wallet using a preferred funding method, whether by credit card, bank transfer, Apple Pay, or Google Pay. With the funds in place, users can then convert fiat to any of the over 350 cryptocurrencies directly within the Trality Wallet and start trading right away—instant approvals for maximum flexibility.

The final step involves choosing a crypto trading bot on the Trality Marketplace (or creating your own) and enjoying the many benefits of automated trading!

Key features of the Trality Wallet

The Trality Wallet provides a seamless integration between the world’s most trusted exchange and the world’s best crypto trading bots—full flexibility without API keys. Trade directly on Trality without having to connect your exchange’s API key. With the Trality Wallet, you no longer have to manually configure and manage API keys from an exchange account in order to connect to Trality.

Since it’s powered by Binance, the Trality Wallet is built on the industry’s safest and most secure custodial wallet infrastructure. Any and all funds deposited into the Trality Wallet are backed by Binance. Enhanced security and risk mitigation protocols mean that your funds are always safe and always yours.

The Trality Wallet—enjoy all of the benefits and functionality of your Binance account while being able to deposit, withdraw and manage your funds all in one place.

Final Thoughts on Crypto Copy Trading

Well, there you have it—the ultimate guide to copy trading crypto. It can be an extremely effective and profitable way to trade, especially for newbies.

Remembering a few key points will go a long way, though. When selecting a copy trading platform, check the spreads and transaction fees, which can often come as an unpleasant surprise for unsuspecting beginners. On the Trality Marketplace, you’ll have all of the requisite information at your fingertips, ensuring that you can copy trade with complete confidence.

You’ll also want to choose a good trader with a solid and transparent track record of success over an extended period of time. Anyone can get lucky. Your aim is to identify a pro copy trader by their long-term successes, and all of the bots offered on Trality’s Marketplace have been extensively vetted by our experts.

And when investing in any assets, it’s important to manage your expectations and control your emotions. Temporary losses can and will happen, but you shouldn’t decide to unfollow a trader prematurely because of fear, doubt, or uncertainty. Similarly, when copy trading crypto, take advantage of the power, consistency, and reliability of crypto trading bots.

And always remember the golden rule of investing: never risk more than you can afford to lose!