Copy Trading: How To Find The Best Crypto Trader

Copy Trading: How To Find the Best Crypto Trader.
If you haven’t heard, anyone can be a trader nowadays. No, you don’t need prior experience and you definitely don’t need to pay thousands of dollars for a premium service or trading group. In fact, you can trade without ever having charted or traded an asset. How? With the power of crypto copy trading.
Copy trading is a hot topic as of late – especially during this bear market. Almost no one knows what to do and how to react to ongoing market dynamics, let alone beginners. But by copying the trades of experts with years of experience, you too might end the day with a positive PnL – for once.
In this article, I’m showing you how to complete the most important copy trading step: how to pick the perfect crypto trader. You’ll also get a glimpse into how to copy trade without a unique automated portfolio management platform – Shrimpy. But let’s first remind ourselves of how copy trading works.
How Does Copy Trading Work?
Copy trading is a popular investing strategy that enables beginners to make money in financial markets without having any experience whatsoever. You can skip years of training and actively trading simply by doing this one trick: copying traders who are already successful.
Trading involves analyzing markets, charting assets, and doing tons of other things that most people don’t have time for. And you have to do it for hours on end every single day. The catch? You only become profitable after doing these things for a few years. I know, it sounds horrific to me as well.
Think of it as starting a gym routine for the first time. You want to become bigger, stronger, and better looking, so you start lifting weights and eating properly. You stick to your routine for a month and do all the hard work that’s necessary. But once you look at yourself in the mirror, you come to a horrifying realization: nothing’s changed.
Your body still isn’t defined. Your bicep may have become larger, but you look nothing close to Arnold Schawrzenger in his prime. You especially look nothing like Ronnie Coleman, the eight times Mr. Olympia winner – the Arthur Hayes of the bodybuilding world. And it’s all because things take time.
No one can lift like Coleman or trade like Hayes, but we can all become a better version of ourselves within a realistic timeframe.
Body building is similar to trading. You don’t see the results for a long time, and it never gets easier. So in gym-terms, copy trading is the equivalent of steroids: a shortcut that helps you achieve your goals in a shorter time than normal.
You can’t build muscles nor capital in a short period of time. But by copying traders who successfully and consistently make profits in crypto markets, you too can profit from trading. But don’t think that copy trading is as simple as clicking the ‘copy this trader!’ button. Effort is still expected from your part – even steroid users have to lift weights.
How to Pick the Perfect Crypto Trader.
Like I said previously, you can’t copy just any trader and expect revenue on your account balance. This is not a pyramid scheme where profits are guaranteed. If your trader of choice wins money, you win as well. But if he loses, so do you. That means you must exercise caution and pick the perfect crypto trader – but how do you spot one?
Just like when dating, you need to have some minimum criteria for your copy trading partner. The criteria you’re looking for depends on what you want out of the market. But to make things simple, I’ll narrow it down to four major lite finance copy trade trading aspects.
Profitability Risk Consistency Followers.
Profitability.
There’s no surprise here. The most important part of making money is the amount of money you make. Profitability is important because simply being profitable isn’t enough. The average S&P 500 trader profits 7% annually – this isn’t even enough to beat inflation. You can double, triple or even quadruple your portfolio simply by investing and HODLing for a year. If you can’t beat that, trading isn’t for you.
When searching for traders on your favorite copy trading platform, always look at their profitability first. How profitable should they be? That question ties in with the next aspect: risk. But let me give you a hint. Good traders make between 5 to 20% gains per week – of course, the number can go lower or higher depending on the market environment.
Risk.
Nothing’s free in life. You can only make as much money as you risk. Things like leverage and margin trading might increase your returns, but they still come with a catch – trade liquidations. So when faced with picking between profits and risk, what do you do?
As someone who traded for years, I think that balance is everything. Chinese philosopher Lao Tzu once said that a flame that burns twice as bright burns half as long. I believe that to be true seeing how many of my trader friends have disappeared over the years. They’d trade good – incredibly good. But they’d forget to slow down and lower their risk, losing everything in the process.
When you choose a trader, check how much money risks per trade. Does he trade half of his account on a futures position? Ignore him. Does he chase trades after a long losing streak? Go to the next trader. Are his position sizes bigger on altcoins than on Bitcoin? You get the idea.
Consistency.
After profitability and risk comes perhaps the most important factor: consistency. No one likes inconsistency. If you perform well one day and slack the next day, people will identify you as someone who’s unreliable. In these troubling and unstable times, unreliability is the one thing no one wants.
A consistent and reliable trader is someone who does his job, no matter how well or poorly, with the same performance most of the time. If I make 40% a week in gains, you’ll want me to repeat that success every week. You don’t want anything to do with me If I profit 40% in one week and make -2000% in PnL during my remaining trading time.
You want consistent results because such results compound over time. Your portfolio might grow slowly, but at least you know that it will reach a respectable level at some point. An inconsistent trader will make a bunch of money and then lose it all the next day. Not only is it an unattractive deal, but it also signals that they’re not doing a good job trading.
Followers.
Follower count – this one is obvious. Why would a trader have a high follower count if they’re unprofitable? People are attracted to good things in life. No one will follow and keep following a bad trader.
Followers on copy trading platforms work the same way as they do on Twitter, Youtube, Instagram, and other social media. Good content receives plenty of followers. Similarly, a good trader gets many followers. It also means that you can trust the trader and that he retains a stable level of consistency.
Copy Trading on Shrimpy.
Analyzing a crypto trader is not that difficult – it’s easier than analyzing assets at least. All you have to do is check basic metrics such as profitability, risk, consistency, and follower count. Carefully assessing these metrics is enough to stay profitable by copy trading.
Now that you know which metrics assess, I’d like to show you how copy trading works on a platform like Shrimpy. Shrimpy is mainly an automated portfolio management platform. But besides automated rebalancing strategies, backtesting, and multi-exchange trade execution, it also offers copy trading services.
Shrimpy has a large community of cryptocurrency traders who share ideas and chat with other traders. Every leader, a person offering others to copy their trades, has a dedicated profile that shows information about their performance, order history, and more.
The image above shows a leaderboard of profiles filled with different users. You can sort them by the number of followers they have, their daily, weekly, or monthly performance, as well as their portfolio. You can even filter users by the exchange they use.
Once you click on a profile, you can see the user’s description, asset allocations, and portfolio performance. A separate tab also shows their order history. You can see exactly which assets they bought or sold, how much they allocated (out of their total portfolio), and the order timestamp. This tab provides you with a transparent view of someone’s trading activity.
Following a leader is pretty easy. All you have to do is choose the portfolio you want to follow and click on the ‘follow leader’ button. You’ll then have to confirm the action and set a portfolio stop loss – an action used to protect your portfolio in case the leader performs poorly.
How does copy trading work in practice? Shrimpy checks a leader’s portfolio allocations each minute. If it detects any changes, those changes are immediately applied to each follower’s portfolio. This means that followers will copy the trades of their leaders each minute.
If you want to learn more about copy trading, I recommend reading the following articles:
A Guide to Copy Trading in Crypto Top 5 Bitcoin Robot Platforms for Beginner Traders The 4 Best Crypto Trading Software for Beginners.
About The Author:
Marko Mihajlović.
Marko is a crypto enthusiast who has been involved in the blockchain industry since 2018. When not charting, tweeting on CT, or researching Solana NFTs, he likes to read about psychology, InfoSec, and geopolitics.