Home / Markets / Cryptocurrency /  Does copy trading make sense for novice crypto investors?

NEW DELHI: Alpha Impact recently launched its copy-trading platform that allows its members to connect with top performing traders and copy their trades. Users can see and copy trades from daily ranked top traders without giving up control over their funds, as Alpha Impact allows users to store their funds in their own exchange account.

There is no minimum threshold or a cap on the invested amount on the social copy trading platform.

For traders, this provides an opportunity to earn passive income from subscriptions and via a revenue share model that lets them, earn commission for each trade.

The platform as of now is available on some of the largest and most popular worldwide exchanges such as Binance, FTX and Kucoin, among others.

The platform will be announcing its plans for India in 2022, and based on the traffic and attention metrics, so far, India is among the top five in terms of priorities.

Commenting on the launch, Hayden Hughes, chief executive officer, Alpha Impact, said, “We provide customers with the access to top traders and empower them to make the investment decision that is best for themselves. For example, our leaderboard function allows customers to sort traders by high returning, by theme (DeFi traders, NFT traders, BTC traders), as well as low risk, low volatility traders."

For advanced customers, the platform allows finding a trader for copy trading on the options markets. Alpha Impact as of now has around 5,000 sign-ups and has selectively invited 500 traders.

On the platform, one of the top strategies has yielded a return of about 400% on a 90-day basis.

What is copy trading?

For beginners, becoming a crypto trader can be daunting. Copy trading essentially means emulating strategies of big traders or influencers, meaning directly copying the positions taken by another trader.

In this strategy, the investors decide the amount they wish to invest and copy the positions taken by the trader that they are following. The investor thus gets the identical returns of traders. So potentially you make money based on others’ skills.

A key advantage of copy trading is that even beginners, who find becoming a crypto trader daunting, can invest like a professional.

Moreover, one can invest in cryptocurrencies, which he or she have not heard of, or have very less knowledge of.

Is copy trading worth the risk?

According to Aliasgar Merchant, developer relations engineer, Tendermint, a key risk of copy trading is not knowing when to time. “Since you are blindly (in most cases) following the trader, you don’t know have adequate knowledge when is the right time to quit and withdraw money."

Moreover, investors don’t learn much from this strategy, becoming handicapped and dependent on a trade master.

Also, people can get greedy. “There should be a balance between profit and your risk appetite. Once it falls and bends on one side, it’s very difficult to come out," the expert added.

While selecting a copy-trader, individuals should look for popular investors with a long-term track record. In term of statistics, look at the performance, risk score, maximum draw downs and assets that crypto-trading are investing in.


Abhinav Kaul

Abhinav Kaul writes on cryptocurrencies and mutual funds at Mint. His previous stints include ETMarkets, Reuters Bangalore and Press Trust of India.
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