Copy trading is the future of financial investments

Trading has become social and the practice is taking off. eToro trader Olivier Danvel talks about his investment strategy and why a long position makes good financial sense.

  
Copy trading is the future of financial investments

Social trading has democratised the world of investing and transformed the way people think about their investment options, according to a veteran investor.

Also known as copy trading, social trading has been influenced by the social networking phenomenon. It allows investors to interact with one another, as well as learn about each other’s trading behaviours and strategies. But more importantly, it gives novice investors the choice to “copy” the position of more experienced traders.

Olivier Danvel, a French investor with more than 20 years of experience managing financial assets, believe copy trading represents the future of financial investments.

“It has made trading very accessible to everybody in the world who has a bank account or credit card,” he says. “People can open an account in less than 24 hours, access financial assets easily – whether they are into stock, foreign exchange [forex] or cryptocurrency trading – secure funds, and obtain transparent data and statistics.”

Danvel, who for the past 10 years has been specialising in currency trading, currently has more than 5,000 investors copying him on the digital trading platform eToro. This represents around USD 7 million of assets under management, or an average of USD 1,400 per investor. 

Low risk pays off

He expects the number of investors copying his trade to cross the 6,000 mark soon, eventually bumping up his eToro ranking from the current Top 2 spot. The rise of Danvel’s support base has been impressive, considering that he only started trading on the platform in 2017.

Danvel attributes this success to swing trading, an investment method he adopts in which he uses technical analysis to look for trading opportunities. This also means that he does not necessarily trade every day, but instead holds his position for a few days, sometimes weeks, until significant price movement leads to reasonable profit.

“Forex fits me by its behaviour, the markets are responding logically to the economic data that are released every day. I trade within a basket of different currency pairs, which means a large diversification of the portfolio based on unique economic and political activities of the most important countries,” he explains.

His low-risk approach has stood him in good stead. Since he started trading on eToro, he has posted 32 cumulative “green” (or positive) months for his copiers.

“My strategy is to return a profit consistently every month. When investors see this in my performance, month after month, they’re enticed to put their trust and money in me. To realise this, I have to adopt a low-risk strategy,” he says.

And the method has paid off. In 2017, Danvel recorded a 16% profit, followed by 18% in 2018 and eight months into 2019, he has already made 7%. “My target is to make 1% profit every month, which is 12% per year. I think we will achieve 12% this year, but even if we only get 10%, I believe investors will be pleased with that return.”

Copy trading basics

Based on his experience, Danvel offers the following tips to help would-be copy traders better understand this form of investing.

  • Determine your goals and purpose for investing – Having a plan is important before dipping your toes into copy trading, says Danvel. “Understand what you are looking for. Do you want to increase your savings, boost your pension, buy a car, or pay for your children’s education? Depending on your risk profile and the investment you’re looking for, you may want to copy a cryptocurrency, forex or stock trader.”
  • Consider taking a long position – “I believe that the real definition of an investor is someone who wants to make money on the market. The only way to do this is to have a long-term investment strategy. When investors see a good product, they tend to follow it for the rest of their life,” according to Danvel. He adds that there may be short-term traders who have had big turnover because their high-risk approach also meant high profits, but after six months to a year, they stop trading because they have “blown up” their account.
  • Look for traders with a consistently positive track record – Trading, by nature, is a volatile activity. Turning in a profit requires a well-developed financial acumen and analytical skills from a trader who can identify trends by navigating through myriad of data. Danvel says being in positive territory builds investor confidence.
  • Choose traders who also educate – When choosing a trader to copy, Danvel recommends that investors look for someone who is open to sharing their knowledge. “eToro is a very transparent platform where everyone can see every question and comment posted. You can’t speak to a trader or another member privately,” he says. Through a trader’s interaction with investors, you can gauge his willingness to impart his knowledge and experience to them.

© eToro 2019


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