If you’re new to trading, learning the related concepts can feel overwhelming. Understanding how stocks, bonds, EFTs, and mutual funds work can all but feel like everything’s coming to you at once.
With that said, it’s very likely that you’ve come across terms like correlated and non-correlated forex pairs. If not, here’s a simple explanation:
Forex pairs move in different ways depending on how economies are connected. Some move together (correlated), while others move independently (non-correlated).
- Correlated Pairs – These currency pairs tend to rise and fall together because they are influenced by similar economic factors.
Example: EUR/USD and GBP/USD (Both involve USD and often move in the same direction.)
- Non-Correlated Pairs – These pairs move separately, meaning if one goes up, the other might go down or stay stable. Example: USD/JPY and AUD/CAD (They react to different economic trends.)
So how do you keep your risks at a minimum to reduce the impact of a ‘bad’ trade? By trading both these pairs. But if you are not an expert in market analysis, how do you ensure that your trades are well-balanced?
The answer – copy trading.
Copy trading is a way to ‘trade’ or participate in the financial markets by automatically replicating trades from other experienced traders. So, instead of doing all the heavy lifting, including conducting extensive research and analyzing charts, copy trading allows you to follow strategies by seasoned traders.
But don’t let the technical jargon scare you off – we’ll try to explain everything as simple as we can in the article below.
How Copy Trading Helps You Diversify and Manage Risk
Copy Trading Helps You Trade Like a Pro, Taking the Emotion Out of Trading
As mentioned earlier, the art of trading can take years to perfect. Many traders—especially beginners—struggle with emotional decision-making. However, with copy trading, you can mirror the trades of skilled professionals who avoid the pit of impulsive trades.
Build a More Balanced Portfolio
A strong trading portfolio isn’t built on a single currency pair or strategy.
But why is this?
Currency pairs tend to respond differently to different factors including policies and market sentiment. If you concentrate all your trades on a single type of pair, you are putting yourself at great risk because your entire portfolio can take a hit when the market moves against you.
Top traders spread their positions across correlated and non-correlated forex pairs.
Learn While You Trade
One of the biggest advantages of copy trading is that it’s not just about profitability—it’s a learning tool. As you follow experienced traders, you can study their risk management techniques, currency pair selections, and market entry points.
In Conclusion, Use Copy Trading to Diversify
To succeed in the trading industry, you’ll need to build up expert-level knowledge – which takes years to achieve.
Fortunately, copy trading offers a great, yet fast way to get started. Not only does it help you learn on the job, but it also helps you diversify your portfolio and take advantage of expert strategies— all while avoiding the demanding, steep academic journey of learning.
Ready to get started? Learn more about copy trading and start trading smarter today.
