OT - Return of the day trader - copycat trading

Return of the daytrader: can you earn a living by copying other investors?
Firms let you mimic the strategies of successful traders with some claiming a sure-fire route to riches

http://www.telegraph...-investors.html

Derrick Clark, a 43-year-old businessman, was keen to trade the global currency markets in his spare time to pull in a little extra income. He was excited about the possibilities, but also in awe of the challenges and pitfalls.

He knew rapid buying and selling of shares and other financial securities was notoriously tricky and that many beginners struggled to make a profit. Copy trading, however, seemed to offer a solution. It seeks to bypass many of the headaches involved in trying to become the next Warren Buffett.

Mr Clark signed up with ZuluTrade, one of a number of fast-growing copy trading – or “social trading” – platforms that allow novice traders to mimic the strategies of more experienced investors. The premise is simple: if you decide to “copy” another trader and they bet, for example, on the pound rising against the dollar, then so will you. Other providers include eToro and Currensee.

“Trading can be hard,” said Anastasios Frangos of ZuluTrade. “But with social trading there’s no need to study the markets. It’s ideal for people who don’t know how to trade – they can simply copy more experienced traders.”

ZuluTrade customers sign up with a third party broker to trade the foreign exchange (“forex”) markets and an account can be opened for a few hundred pounds. It ranks its traders by historic performance to help users decide who to copy.

Mr Clark carefully analysed the data before he risked his hard-earned cash. At first it went well and he made some money. One particular trader had an army of copiers and looked like a safe pair of hands. “I watched him for 10 months and he never lost on a trade,” Mr Clark recalled. “But then it went horribly wrong.”

The market moved sharply in the opposite direction. Mr Clark closed his position quickly but others were not so lucky. “This trader lost millions in live accounts. It was epic.”