Copy trading is the act of copying the investment decisions of another trader in your account. In the Japanese stock market, copy trading has become a popular way for investors to get started without wasting time and effort learning about individual stocks. Traders do this to find other investors with similar goals who have already achieved success in the market.
Japanese copy trading risks
As with all types of investment, copy trading is not without risk.
Losses can quickly spiral out of control
When copy trading, it is essential to remember that you are essentially trusting another person with your money, meaning that if they make a terrible decision, you will follow suit. This is a big risk to take, and you should remember to only invest what you can afford to lose.
You may not fully understand what you are investing in
Another risk of copy trading is that you may not fully understand what you are investing in, leading to poor investment decisions such as going all in on products you do not understand.
Copy trading can be addictive
Another risk of copy trading is that it can be addictive because it can be exciting to see your account balance increase without having to put in too much effort. However, this can lead to you taking more risks than you should, which is never a good idea in trading.
Benefits of copy trading in the Japanese market
You can find more opportunities in the market
By expanding your horizons and copying other traders, you can tap into more financial markets and find more opportunities across different asset classes. This is a great way to diversify your portfolio and eventually gain experience in how certain products are traded, so you can one day trade independently.
For example, when it comes to Saxo Bank US stocks, even if you have no prior experience in trading stocks outside of Japan, you can participate.
It is a simple way to get started in the market
Copy trading is also a great way to get started in the Japanese stock market because you don’t have to learn about individual stocks. Instead, you can follow the lead of another trader and gain experience through analyzing their patterns and moves.
You can customize your copy trading experience
When you copy trade, you can customize your experience to some extent. For example, you can choose how much money you want to invest and how often you want to copy a trade. For some copy trading systems, you can also customize stop limits when you place your order, so that you do not have to follow the exact trading trajectory of the trader you are copying.
Copy trading can be employed in the long term
Copy trading can be employed in the long term because there is an abundance of copy traders out there in the world. Just on MT4 alone there are millions of traders, and many provide their own services. This means that if the person you are copying now decides to stop trading, or if their strategies no longer interest you, you can simply stop copying them and start copying someone else.
In the long term, there are plenty of opportunities for you as a trade copier across different asset classes and products.
How to copy trades in Japan
Choose a broker that offers copy trading
The first step to copy trading is to choose a broker that offers trading in the products that you want to trade. Some brokers will have their built-in copy trading solution which you can employ on their platform, while other brokers will allow you to integrate third-party copy trading solutions into your trading platform.
Choose a trader to copy
After choosing a broker, you must choose a trader to copy. Make sure to choose someone you feel comfortable with and with a good track record of success. You can often shop around and look at traders’ profiles, and a good measure of figuring out which traders to copy is to take a look at their AUM (assets under management), the number of followers, and win:lose ratios.
Set up your account
After you have chosen a broker and trader, you will need to set up your account. This process is typically straightforward and only requires some basic information about yourself, as well as verification of your ID.
Fund your account
Once your account is set up, you must deposit money into it in order to trade live. You can do this with a credit or debit card, bank transfer, or online payment service, depending on your broker.
At this stage, it is important not to deposit more money into your account than you can afford to lose. There are also brokers that require you to have minimum deposits depending on the account type you want to open, so you should be mindful of not dipping below the required minimum amount.
Start copy trading
After funding your account and finding the trader you want to copy, you can start copy trading. This process is typically automated, so you don’t have to do anything. Your chosen trades will automatically be copied, and their trades will be executed in your account.
It is important when you are copy trading to take note of your progress and your earnings. This way, you can ensure you have sufficient time to pump the brakes if needed.