We check how Copy Trading in Binance works in practice [TEST]

Copy Trading in Binance it is a relatively new service, although the idea itself is nothing new. For over a decade, the so-called social investing (social trading) or operating under a different name, i.e. "copying plays", is available on Forex market. Platforms were among the first to offer this type of trading ZuluTrade and eToro, and in Poland TMS Brokers (under the Go4X brand – discontinued around 2015).

We have previously tested the mentioned Zulu and eToro. Now it's time for the crypto market. Because cryptocurrencies are "new Forex", the demon of volatility, a place of great opportunities and high rates of return, we decided to check what copy trading in Binance looks like in practice. The test started on January 17, 2024, we invested USD 400 for the trial and we will report the results in some time.

What is copy trading?

Copy trading is a service of copying the moves of other traders. It works fully automatically, which means that after selecting the trader whose transactions we want to duplicate, we do not have to do anything else. We can change the parameters of our investment or terminate it at any time. The trader we have chosen does not manage our funds and they are not transferred to his account or at his disposal. They are still on our account and only we decide whether we want to imitate someone or not.

How does copy trading work on Binance?

The service is quite intuitive. Of course, you should start by creating an account on Binance if you don't have one yet. By registering on Binance from the Forex Club link everyone receives -10% lower commission. In the next stage, we can decide whether we will share our transactions (i.e. we become, as Binance called it, Team Leader), or do we want to copy the moves of others. The trader who gives the signals receives remuneration in the form of 10% of earned profits. And this is also a cost that must be borne by the person copying (plus commissions on futures transactions for Binance). Importantly, the donor must allocate an amount between $1000 and $200 to their real account. The minimum investment to start copying varies depending on the Team Leader you choose, but most often starts at $000.

In our case, we decided to copy others, so we will show you what it looks like from this perspective. So let's get down to specifics. I warn you that some of the expressions and translations on the Binance application are quite... illogical, sometimes incorrect or incomprehensible, but I will help you find your way in this chaos.

Step I. Funds allocated to Copy Trading

To start investing, you must have funds in USDT on your account Binance account. They just need to be on Spot wallet, there is no need to transfer them further to the Futures or other wallet.

Step II. Futures -> Copy Trading

This is the tab we need to go to in the mobile application to select our signal provider. At the very bottom (1) there are tabs Portfolio and Copy. In the first one you will find a list of traders who are Team Leaders, and in the second one you will find those who are already copied. At the top (2) we have it again Portfolio (meaning the same) and My favorite, where there are traders selected by us, whom we want to observe but not necessarily copy. A little lower are the filtering parameters (3) for the list of traders, where:

• PnL – profit achieved in currency,
• ROI – rate of return,
• MDD – maximum recorded capital drawdown,
• AUM – capital in management,
• Copy traders – number of people copying a given trader,
• PnL Copy Trader – profit achieved by people copying
• Sharpe index – investment efficiency ratio. The higher, the better.

We always get the result from highest to lowest, except for MDD where it's the other way around.

Copy Trading on Binance. Source: Binance App

The filter will also be important for us Hide all – it hides people who we cannot copy at the moment due to their lack "vacancies". Most often, Team Leaders can be copied by only 200-400 people (sometimes more, but very rarely) and sometimes this limit is reached (under the name of the team leader there is a marking, e.g. 200/200, and the copy button is replaced with the word FULL). In such a situation, in order to include it in our portfolio, someone has to resign. We did not find any information on the Binance website whether this is a restriction imposed by the exchange itself or a voluntary choice of the trader (but I would bet on the former).

Step III. Choosing a Team Leader

The list of traders is very large, so filtering is a necessary option. After selecting our candidate, just click the yellow button Copy. In the next window, we must specify the amount of our investment in USDT and also determine the total value stop loss. We also have to choose between two options:

• constant factor – whether positions should be opened with a volume proportional to the deposit held by the trader,
• fixed amount – whether positions are to be opened with a fixed volume.

We also have advanced settings at our disposal that allow us to define things such as:

• what margin should be used (team leader or permanent),
• what leverage should be used (team leader or permanent),
• Take Profit and Stop Loss for the rate of return % (ROI),
• Maximum order per symbol (percentage of our deposit).

As you can see, these are risk management parameters that can be both increased and decreased in relation to the actions of the trader we want to copy. To make our test better reflect what traders themselves present, we did not use these options.

$400 and our traders' choice

Our initial investment starts at $400, which we divided into 4 equal parts. Each USD 100 of capital was assigned to a different trader, where we set the SL to 50% (USD 50 loss). We are aware that even with a relatively small MDD, it may turn out that the investment will end quickly (market volatility, bad timing of the start of copying, etc.) - however, this is a risk that we cannot avoid, which is why the initial capital is small.

Here is the list of traders we selected:

• 百倍百倍
• zZ_Coffee_PrincE_Zz
• nhatvechai88
• KokoKripto

(click to zoom)

What guided our selection?

We focused on several criteria that determined the choice of a trader, namely:

• what the capital curve looks like - what is important to us is a gradual increase in value, where there are no individual spikes in profit or loss (this suggests luck/bad luck; poor capital management), we reject curves suggesting an aggressive grid,
• 30-day MDD is not greater than 30%,
• satisfactory cash profit and ROI,
• The Sharpe ratio should preferably be above 5,
• We did not choose stars who have great results and AUM (a lot of pressure and a chance for a strong correction),
• It is best if the trading history is at least 30 days old.

We are also aware that the service is relatively new, so even potentially successful traders do not need to have many years of account history.

Copy Trading in Binance – what are our expectations?

The primary goal is to check how efficient this service is compared to forex alternatives. We are aware that kryptowaluty are very volatile, so we take the risk into account "spill out" one of the Team Leaders, as well as quick rotation if one of them was not doing very well or started to raise doubts with his actions. We also set our internal capital drawdown for the entire investment at -50%. We trade without take profit, although our expectations in terms of profits are in the background.

The first transactions have already started, and we will come back to you with a summary soon!

By registering using the link above, you receive a 10% COMMISSION DISCOUNT

Try Copy Trading on Demo and Win [Competition]

The start of our test coincided with a new Binance promotion dedicated to copy trading. A competition has been launched in which you can win up to 30 USDT while testing the Copy Trading service on virtual funds. The competition is divided into two phases: