Why Can’t You Just Copy Trades From A Professional?

In the short-term it might seem like a great idea, but most traders don't consider all the risks involved.
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We have a great question here from a subscriber that wants to know why they can’t just copy trades from a professional trader. So, with all of the nuances in trading, and seeing how long it can take to become as good as a professional, why not just copy the trades instead?

So, this is really a fantastic question, so thanks for it. And the answer is actually a lot simpler than you might realize. You see, when you copy trades from a professional, there is obviously the incentive of making money from the success which is great. And it’s very alluring for many traders, especially for beginners. But there is usually one thing that traders don’t take into account and that is both the short term and the longer term risks involved with that decision. So, all traders go through rough patches.

That is something that we need to always remember. For some traders, it might take them a day or a week to get over it. For others it might take them a week to a month and for others it might take months on end. And for some, they might not ever recover from a rough patch. And it can last for you know, a couple of months or a couple of years, eventually leading them to stop. And maybe even you know, causing them to lose a lot of money.

Now imagine that you have just started copying trade from a professional trader. And just as you start, they start to go through a rough patch. Now for the professional, it’s not going to be such a big deal because they’ve got thousands of trade, but and you know, they’ve done thousands and thousands of traders, it’s just another rodeo for them. And they’ve probably got a lot of profits already locked in in the background.

So there aren’t really too concerned about that drawdown as drawdown is normal for them. But for you that is just starting, if you walk into those trades while they’re going through that rough patch, you could immediately go into a big drawdown.

Now imagine it’s a really serious trader that uses more leverage than you might be accustomed to. Suddenly you can just start out copying trades and already be in a drawdown or four or five or 10%. And what do you do then?

Right, so the thing from a long term perspective in that type of scenario, of course, is to just stay with the trader, because if the track record is solid, if it’s a real professional trader, then they will eventually, you know, get back on the, on the saddle, so to speak, and they will turn it around. But what of the rough, what of the rough the traders rough patch? Only gets worse from them. And imagine that, you know, you bail out on the signals, and just when you bail out with a 8% loss, suddenly they hit another winning streak, and they start to recover?

Then the only thing that you’ve done is, you’ve caused yourself a lot of unnecessary stress and you’ve lost money. The other risk to consider, is time risk.

So what if the trader retires in a year from now? What if a hedge fund you know, comes around and offers him a great seat on the board of directors and they stop all of the current signals? What if they simply just stopped trading because they don’t want distress anymore and just want to retire and take things easy. What do you do then?

So, you see, for those type of reasons, it’s, it’s always best to try and hone your own skills so that you can keep the success in your own hands so to speak. In the long run, that will be a far more rewarding endeavor, as opposed to just, you know, copying trades in the short term. But of course, that’s just my opinion on the matter. Every trader will have their own prerogative to decide for themselves and what to do.

And so I hope that helps any other questions, don’t hesitate to let us know.

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