Diversifying your investments is important in building wealth. There’s an old saying, “Don’t put all your eggs in one basket,” which means don’t put all your money in one investment. The same principle applies for CopyPip users as well. In copy trading, strategy followers (SFs) should diversify their risk by following a few strategy providers (SPs).
Traders should diversify their portfolios by spreading investments across different types of investments or channels to minimise the exposure to any one type of asset. Similarly, CopyPip followers should follow a few providers (we suggest 2-4 SPs) to minimise the risk of anyone of the SPs going rogue.
One example of diversification is by following SPs of similar max drawdown and returns. Let’s say you are looking at a low-risk profile. The first thing to note will be to look for providers that has low max drawdown and adequate returns. Why do we use adequate returns? We have to keep in mind that high returns come with high risk and low risk comes with low returns. In order to get high returns, a provider will take higher risk.
The SFs can then follow the provider with different settings. We recommend following the providers using either Fixed trade size or Proportional trade size.
To understand how Fixed trade size or Proportional trade size works, please refer to our CopyPip PDF guide in Fullerton Suite or our video tutorial for CopyPip Strategy Follower on Youtube.
While there are many ways to diversify your CopyPip portfolio, here are 3 main types of diversification that you can explore.
- Top Traders Portfolio – Choose the top 3 providers based on the CopyPip ranking system. By doing so, your portfolio will consist of the best performing providers yet having adequate drawdown.
- Long-Running Portfolio – Choose providers who have been running for the longest period of time (choose the right setting under the ‘Age’ filter). Their performance is most likely to be stable and consistent. Risk could be slightly lower while returns could be average.
- Mixed Currencies Portfolio – Choose specific providers who trade only one specific currency pair. For example, pick 3 different SPs, namely SP1, SP2 and SP3. SP1 trades only USD/JPY, SP2 only trades EUR/USD and SP3 only trades gold. This method allows diversification of different currency pairs.
These are just some examples of how you can diversify your CopyPip portfolio to suit your risk profile and even hedge your trades. The ultimate goal of following different SPs is to minimise long-term risk and enhance your opportunities for growth.
Fullerton Markets Research Team
Your Committed Trading Partner