I admit, the title is a bit provocative but I think in this case it’s ok. Especially eToro’s OpenBook makes this topic as popular as it’s never been before. Trading Forex automatically is the new trend on the Internet. I want to explain shortly what platforms like eToro OpenBook and Zulutrade are about: eToro OpenBook is a platform where trades and results of all traders are displayed. So you can see that Mr. Maier from Germany just closed a Gold position and took a profit of xy. It would be pretty difficult to follow these traders and copy trades and that’s why eToro – one of the largest Forex broker – thought it would make sense to give traders the opportunity to do this automatically. This is not a new idea. Zulutrade offers a similar concept for a couple of years already and gives you the chance to use other brokers as well, not just eToro.
Nevertheless, you should always take a closer look before you make a decision and that’s why we suggest that you click here and find out what the eToro Openbook is all about.
So you have the option to select successful traders and copy their trades automatically. This sounds like an easy way to make money because successful traders should be, well, successful and if you can make exactly the same trades, you should be successful as well. But there are a couple of issues, especially for novice traders that want to try eToro’s OpenBook or Zulutrade.
First of all, the selected trader(s) have to fit to your trading preferences. That means that he should have a similar risk profile. Why should you copy a trader that made 500 % profit over the last 3 months but made extremly risky trades while you don’t want to take big risks? It was wrong to copy this trader just of his solid profit. And the problem is that risk is hard to analyze. Etoro offers scales that try to express risk but it’s not very objective. For example the standard deviation of profits is a risk traders may ignore but the use of a leverage that was too high for highly volatile market conditions may be something you want to avoid.
Another problem is that profit figues you can see are based on past data. Like everywhere else in the world of finance, this is not the best criteria. Just because a stock made 15 % in 2010 doesn’t mean that it’s gonna be the same in 2011. And especially with OpenBook there are more issues: You can only see data for the very past and only short periods of time like 3 months or less. When a trader shows good results for the last 3 months it doesn’t say anything about his real performance. It could be luck, it could be a good trader or anything else. Interestingly, you can already see differences between 1-month and 3-month data. Meaning that traders that are on top within 1 month can’t be found in 3 month ranges. Obviously, this is no general guideline but it’s true for the biggest part of all traders.
So how can you summarize this topic? Maybe the best advice is the following: Forex is not like printing money and only because it’s possible to copy traders using eToro’s OpenBook or Zulutrade, doesn’t mean that you can make money easily without any knowledge. There’s no free lunch they say. It’s absolutely possible to pick the right trader and show good profits. But this can also be luck and nothing else. You should see eToro’s OpenBook like a network of traders where you can communicate with others and learn from them. Overall, it’s very beneficial for Forex newbies if they know what they are doing and don’t just copy traders that seem to be successful.
It’s worth taking a look at eToro’s OpenBook. Click here to do so!
