Follow professional traders and funds to diversify currency investment holdings.
Signals or copy trading is a way for investors and corporations to follow professional traders and funds for free or for a monthly subscription fee. The entries and exits made by the professional traders and funds are directly copied by investors and corporations. The positions taken and size of the orders are all proportioned to the account size of the copied professional trader or fund. So why should investors and corporations consider doing this?
Follow Professional Traders and Funds to put investments into steady hands
When done properly, this route is much like investing with mutual funds or hedge funds. They take positions with the objective to make money for themselves and their clients. One individual signal provider should not be the sole determinant of an investor or corporation's investments in the currency market, but rather when done properly there is a creation of a portfolio. They are deemed as "people-based" portfolios or signal portfolios (copy trading services are called Signals by MetaQuotes), inspired by copy trading and the ability to follow professional traders and funds.
The ability to cancel subscriptions and subscribe to the signals provided by these professional traders and managed funds provides flexibility and ease when portfolios are re-balanced or when a particular signal provider is not meeting needs.
The returns, metrics, trading history and much more are independently verified and published in real-time. There's no ability to alter the results, the complete history is provided for the purposes of transparency. The returns generated often beat the market.
Diversification and Portfolio Management made easy
When a portfolio of self-created algorithms (Expert Advisors) and signals (copy trading) is created, there can be risk reduction that does not come at the expense of better returns. It's just like investing in multiple stocks or mutual funds.
Like all portfolios, over time, there will be a need for re-balancing and portfolio managers will alter the composition of the portfolio in two ways: Changing signal subscriptions and shifting money from one sub-account to another.
Sub-accounts make it possible to have multiple signals, expert advisors and algorithms operating at once. There is no need to create a separate account to have a sub-account, this is something that can done easily by communicating such desires to a broker and then transferring a desired amount of funds into the sub-account. A broker that will not allow the creation of a sub-account is a broker to avoid.
A Mature and Rational Mindset is Required
Those looking for exorbitant returns may have trouble with signals since they may not necessarily deliver the results of a lottery ticket, a winning bet at the sportsbook or a hand of blackjack at a casino. Greater risk comes with greater reward, but this is not gambling. Gamblers play games that have a negative expected value and have odds against them, investors look to place their money into investments that generate positive returns.
Proper risk management and setting reasonable expectations is important. The objective is to generate alpha and reduce beta.