When it comes to forex trading, there’s a good chance you know a group of people like this: although they don’t have extensive knowledge of forex, don’t use particularly complex trading techniques, and don’t even have much trading experience, they’re still able to consistently and continuously make huge profits in the forex market over the long term. Their secret to success is that they use forex copy trading.In fact, this group makes up a significant proportion of the forex market. To turn them into your clients, it’s essential that you understand what forex copy trading is and how to set up a forex copy trading system.
Forex copy trading generally consists of three components. The first is the forex trading leader, who is responsible for the actual trading operations; therefore, the leader must possess exceptional trading experience and a wealth of forex knowledge.Second are the forex copy traders—the very “group of people” mentioned earlier. By simply following the instructions issued by the leader, they can achieve a win rate close to that of the leader;Third is the bridge connecting the leader and the followers. This bridge helps the leader communicate trading information as quickly as possible, allowing followers to successfully execute a trade once they receive the instructions.
So what exactly is an MT4 forex copy trading system? Although forex copy trading may seem simple, there is more than one type of copy trading system available, with MAM and PAMM being the most popular.
MAM stands for Multi-Account Management System. In a multi-account management system, the accounts of the forex trading leader and the followers are separate; the leader cannot directly control the followers’ accounts. Generally, according to specific rules, when the leader executes a trade, the other accounts linked to the leader’s main account will follow suit.Specific rules include the total trading volume principle, the identical position size rule, and others.
PAMM stands for Percentage Allocation of Managed Funds. The main difference between PAMM and MAM is that PAMM uses a single account, which facilitates the leader’s forex trading.The defining feature of PAMM is the percentage-based distribution. After each trade, all losses and profits from the account—after deducting the manager’s commission—are distributed according to the percentage of funds each participant holds. For example, if the manager holds 70% of the account’s funds and the two followers, A and B, each hold 15%, then the profits are distributed according to these proportions.
Once you’ve identified the different types of copy-trading systems, you’ll need to consider some specific implementation issues.
The first consideration is whether to establish a cross-platform copy-trading system. Cross-platform copy-trading refers to a scenario where the leader is not on that platform; instead, the platform simply captures the leader’s trading signals and allows its own clients to copy them. Of course, while cross-platform copy-trading gives clients more options, latency will inevitably be higher than that of a same-platform copy-trading system of comparable quality.
Second is the issue of latency. Generally speaking, the lower the latency, the closer the timing of trades between followers and the leader, and the cost of building such a copy-trading system will naturally be higher; conversely, the higher the latency, the lower the cost, but there is a greater chance that followers will miss out on profit opportunities.
Once you’ve carefully considered these specific issues, you’ll be able to discuss them with the platform provider and choose the copy trading system that’s right for you. We’re confident that after reading this article, you’ll be able to successfully set up your own forex copy trading system.
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