What is Copy trading?

Copy trading is a form of trading that allows you to directly imitate the position another trader takes in the market. You simply choose the amount to stake with and copy the pattern they follow automatically in real-time. So, once a movement takes place on the other person’s account, it will also reflect in yours.

It is not compulsory for you to obtain any input on the trade but you will get identical profits on every trade as that of your chosen trader. This is one of the simplest ways to make use of another trader’s expertise.  Control over the outcome on trades is not lost, whereas you still have the capacity to close and open trades whenever you want.

Copy trading will help you if you’re a beginner, as you don’t need an advanced knowledge of financial markets and it’s history dates to as far back as 2005, a time when traders used to imitate particular algorithms built through automatic trading. It was a potential brokers recognized, a system whereby any client linked to such trader could copy automatically their trading account. The need to persistently monitor ‘chat’ rooms or email signals was eliminated. Since then, copy trading has become widely accepted.

How does Copy trading work?

This is an automatic system of trading that involves an easy step-by-step guide, which are as follows:

  • Pick and follow a trader that best matches your trading goals

Brokers provide tools on their platform for you to filter the traders available to invest with, peak through their number of followers, level of risk, profitability, the sun total of capital they handle and their percentage return on investment. Pick a combination of factors based entirely on what is important to you.

  • Decide the amount to invest with
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Choose how much you are capable of investing with and willing to risk. Also decide how it will be shared among the various managers. Balance your portfolio and make sure not to put all your capital into a single place. Look at how much to place with each individual trader if you have chosen more than one to copy.

  • The broker or platform will replicate automatically all the chosen trader’s position onto your account.
  • You can decide to add more capital if your trader is performing well or limit your exposure of particular traders and rather diversify your portfolio by not investing largely with a single trader.

Who regulates trading and copy trading in New Zealand?

The FMA (Financial Market Authority) is the top organization in charge  responsible for regulating trading in New Zealand’s financial matket. This role was obtained from the Securities Commission in New Zealand which went through a host of criticism between 2006 and 2010. The commission was finding it hard to make strict trading regulations that will provide customers good protection.

This organization was established in 2011 with the aim of putting a stop to the weak regulations made by the Securities Commission of New Zealand and in all bring proper order to the financial market. They took up several responsibilities and a new financial bill was passed that year that allowed them issue and revoke licences of financial establishments, undergo supervision and oversee such companies business conduct.

The domain of FMA was enlarged in 2014, thanks to the new act passed in 2013 which gave them better options and tools to create a secure environment for every individual in the market.

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What Does New Zealand law say about trading?

The laws in New Zealand allow anyone trade legally using series of financial instruments such as shares, gold and oil, currency pairs etc. You are also allowed legally to purchase CFDs including Forex, commodities, shares or indices.

What are tax obligations for traders?

In New Zealand, investors are expected to pay tax on the profit accrued from their trading effort, up to 33cents in the dollar ($).

What copy trading platforms are good for New Zealanders? 

eToro is the best copy trading platform and broker for New Zealanders. It is a social trading platform known all over the World, established in 2007, and headquartered in Cyprus.

They offer a top-notch platform that allow traders make research on the investment strategies used by investors on the broker i.e general parameters, the trader’s whole investment history, orders, financial assets traded, earnings and historical losses. With the information provided, traders can then copy the portfolio of other users, and in turn be copied by others too (as long as their profile is set up as public).

It is possible to attract traders who might be willing to invest using your trading strategies. This will in turn generate commission for you.

eToro is a trustworthy broker regulated in Cyprus, the United Kingdom and Licensed by the British Financial Conduct Authority. They are also Licensed by Cyprus’s Securities and Exchange Commission and is a member of the National Futures Association.

The social trading platform of eToro was launched in 2010 and has since then made several improvements on their platform such as the possibility to set a leverage on each trade, receiving commissions when copied by other investors, copying thematic portfolios under the CopyPortfolios area.

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The following functionalities are allowed on eToro’s trading platform:

– Take Profit

Take Profit is a functionality that allows a specified maximum value at which a trade should be closed when the expected price is reached. This is set automatically and allows a trader protect profits and cashout when a financial asset rises.

– Stop Loss

The Stop Loss functionality is a minimum price that indicates when a position on the trade of a financial instrument should be closed. It is also automatic and helps reduce the losses if the price of an asset falls.

– Limit Order

A Limit Order is an order to purchase or sell a stock at a particular price or when it moves higher, and it can be grouped into Buy limit order and sell limit order.

– Leverage Level

eToro enable users set a level of leverage with which they use to trade the financial market. The level of leverage varies depending on the instrument.   

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