How does the process of copying a traders transactions to investors accounts through the CopyTrader service work?

Today we will tell you about the internal kitchen of the service. You will understand exactly how the copying process takes place in the trader and investor terminals. You will also find out what convenient functions our service provides for comfortable copy trading.

Any trade transaction on the Binance or Baybit crypto exchange begins with the opening. To do this, the trader chooses a trading instrument, conducts fundamental or technical analysis. Now we will not go into the details of our traders trading system. Note only that as a result of the analysis, the trader determines the direction of further movement of the cryptocurrency exchange rate and the opening price of the transaction. If the trader predicts the growth of quotations, then he opens a long. If a fall is expected, then a short opens. To do this, he sets a limit order indicating the opening price of the transaction and its volume. Also, according to his trading system, the trader sets the parameters of take profit and stop loss. Then he presses the button to open a deal - Buy or Sell. 

We know that with a delay of less than 1 second, a similar transaction is opened in the investors terminal without his direct participation. As you can see, all the parameters of the transactions are the same. Including take profit and stop loss levels.

A trader can open additional positions and change the parameters of existing transactions at any time. All these actions will also be copied to the investors account.

When a trader decides that it no longer makes sense to hold an open trade, he closes it at the market price or with a limit order. After the trader closes the transaction, the same action takes place on the investors account.

How does the direct copying of the traders trades take place?

Consider an example. Both participants of the service have a long open on the same trading instrument. Only the volume of transactions differs. The trader has an open position for 15 lots. The investor has 25 lots. The difference may have been formed due to the fact that earlier the investor independently made trade transactions and left some of the old positions open. Then the investor decided to transfer the trading authority to an experienced trader through our copy service. And turned on the direct copy mode. 

Lets go back to our example. The trader decided to close part of the position and placed a market order to close 5 lots. As you can see, messages about the execution of sell orders at the market price of five lots came to both participants of the copy service with a deviation of no more than a second. The investors market order execution price may differ slightly from the traders price due to the price movement in the interval between the execution time of the primary and copied orders. 

In this case, a direct copy of the traders transactions is shown without taking into account the difference between deposits and initial positions on the trading instrument. In this mode, transactions on the investors account will be copied with the parameters that the trader makes them. On the one hand, this does not allow the investor to fully effectively use his entire deposit. But on the other hand, this regime significantly reduces the risks of investors capital loss.

Why do I need limit orders when copying trades?

To exclude the possibility of unfavorable deviations of quotations, the trader uses limit orders, not market ones, in which he indicates a clear price at which the order should be executed.

Why is it necessary to automatically close the remainder of the investors position?

If the traders open position volume was less than the investors, then when the closing limit orders are executed, the trader will have the entire position closed, and the investor will have the remaining 10 lots. But after a while, as we can see, the rest of the investors position closed. 

In this case, the automatic closing of the remaining position of the investor worked. Thus, the positions of the copying participants were synchronized for correct work in the future. The essence of synchronization boils down to the following: if the trader does not have a position, and the investor has it for some reason, then it will be forcibly closed. Synchronization works with an interval of 1 time in 30 seconds.

Why change the trading position mode?

Considering that trading strategies may include hedging elements, that is, transactions opened both in long and short, our service provides for the possibility of changing the position mode. 

One-way mode is selected when the trader opens trades in only one direction. For example, if he sees a growing trend, then he only buys. Otherwise, it only sells.

The hedging mode is chosen by the trader when he does not want to miss the opportunity to earn on both trend and corrective movements of the cryptocurrency price.

For correct copying of transactions, the modes of the trader and the investor must coincide. The investors mode switching occurs automatically as a result of synchronization of account settings.

How does automatic synchronization of the volume of open positions work?

The copy service has the ability to automatically synchronize the volume of an open position. This function is extremely useful if the investor already has an open position on a trading instrument at the time of the start of copying. If a trader opens a deal on the same instrument, but with a larger volume compared to the volume of the investors transaction, then as a result of copying, the volume of the investors position will be equal to the traders position.

If, during the monitoring of an open transaction, the investor decides to intervene in the traders trading and manually close part of the open position, the average closing price of the transaction will change. This can have a negative impact on profits. Therefore, investors are not recommended to interfere with the work of professional traders. With regard to the operation of the service, it is important to note that in this case, the synchronicity of the accounts will not be disrupted. 

At the next correction by the trader of the existing positions, the automatic alignment of the position sizes of the participants of the copy service will occur. Thus, if the investor has already closed part of the position, then the automatic closing will occur in a smaller volume than it should have been, according to the traders trading system.

Copying of limit orders with equal deposits occurs without any adjustments. If the investors deposit, for example, is 2 times less than the traders deposit, then copying transactions will occur with a decrease in their volume also by 2 times. Similarly, there will be an increase in the volume of open positions, if the investors deposit exceeds the traders deposit.

How to reduce the risk of losses from copying a traders trades?

If an investor wants to reduce the risk of losing his deposit, he can specify in the service user settings the percentage of the free deposit used in copying transactions. The investor can make this adjustment independently or make a corresponding request to the system administrator. It should be noted that reducing the risk on the deposit also leads to a decrease in the profitability of trading operations.

For more details, see the new video on our YouTube channel.

 

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