This depends on your own preferences, and style of trading, but there are a number of things to be aware of if you’re an investor:
- Performance fee: When your copied investments turn profitable, the performance fee rate set by the strategy provider is paid out of the investor’s share of the profit. The performance fee is an essential incentive for strategy providers to make the best trades.
- Timing: It is possible for an investor to start copying a profitable strategy, but not make a profit because the strategy did not grow while the investor was copying; this is due to the timing of the copy action made by the investor.
- Control: An investor has the ability to copy a strategy or stop copying a strategy - they have no control over the trades made by a strategy provider, and this may frustrate more hands-on traders.
- Risk Management: As an investor, you are not immune to the risk and must consider your risk management strategies within the context of Social Trading. It is the responsibility of the investor to consider their own risk tolerance.
- Past Performance: A strategy provider’s past performance is not a guarantee of future results.
All of these drawbacks can be mitigated with good risk management, and careful consideration. We recommend reading more about what goes into a strategy so that you can better manage them.