Binance: new interesting tool for trading on the exchange

The famous crypto exchange Binance has launched a new interesting tool for trading on spot pairs. In the futures market, it had already been launched in October of last year, but only in some regions. 

This is the so-called copy trading in the spot market.

Copy trading on Binance: the new tool of the crypto exchange

There are already other crypto exchanges that support tools like the one launched yesterday by Binance, so it was a bit surprising that the world’s largest crypto exchange had not yet activated spot copy trading.

The exchange has also activated two promotions, which will last until May 8th, to promote the launch of the new feature. 

Copy trading spot is a feature that allows users to copy the real-time operations of experienced traders, called “lead traders”. 

Indeed, copy trading allows lead traders to share their trading skills and decision-making abilities, while giving them the opportunity to unlock extra rewards, and above all to earn a share of the profits from traders who copy their operations.

So on one side there will be experienced traders who will agree to participate in the initiative by actually making their trading strategies available for other users to copy.

On the other hand, there will be common users who will be able to copy their operations in an attempt to replicate their profits. Obviously, however, in case of losses, these would also be replicated.

Indeed, copy trading is a feature that allows users to copy the real-time operations of experienced traders, called lead traders. 

Lead traders will be able to display their own operations, both to improve their reputation and professional credibility, and to receive extra rewards and a share of the profits from the traders who copy their operations.

Other users, on the other hand, will be able to copy the operations of the lead traders, if they want, in the hope of obtaining better profits than they could achieve by operating independently. 

Obviously there is still no guarantee of profit. 

How to proceed

In order to use this new feature, you need to be registered and verified on Binance, and have suitable funds to be used in this way.

To use spot copy trading on Binance, traders will need to transfer their assets from the Spot Wallet to the Spot Copy Trading Wallet. This measure is taken to prevent assets from being withdrawn, transferred, or used for other operations while being used for copy trading.

So there will be two spot wallets, one for traditional spot trading and one for copy trading spot. Users will have to decide what to keep in the first one, and eventually what to transfer to the second one, and only the funds moved to the Spot Copy Trading Wallet can be used for copy trading. 

Furthermore, from the Spot Copy Trading Wallet it will not be possible to withdraw assets directly, but in case you want to withdraw them, you will have to move them first to the traditional spot wallet of the exchange, from where you can obviously withdraw them with the usual procedure. 

In other words, the new Copy Trading Wallet Spot will be a sort of closed extension of the exchange’s spot wallet, usable only for copy trading operations, or deposits or withdrawals to and from the normal Spot Wallet. 

The procedure to be able to use the new copy trading feature on Binance has been described in a specific guide published by the exchange in the FAQ section of their official website.

The other exchanges

This time the world’s largest crypto exchange arrived slightly late.

Indeed, although the functionality of copy trading has not been around for very long, other exchanges have been offering it for years. 

However, Binance’s almost absolute dominance among centralized crypto exchanges reveals that, until now, offering copy trading has not been particularly important for an exchange of this type. After all, the majority of trading volumes are mainly driven by derivative markets, such as futures and options, rather than the spot market itself. 

For example, in the last 24 hours, the crypto derivatives market on Binance recorded a trading volume of over $49 billion, while the spot market on the same exchange stopped at just over $20 billion, which is less than half. 

However, if we add up the volumes of all derivative exchanges, the figure becomes colossal, so much so that only the top ten together exceed 250 billion dollars daily, while the top ten spot markets stop just above 100 billion. 

The risks of the new Binance exchange tool

However, it is necessary to specify that copy trading involves additional risks. 

Indeed, even by copying the strategies of speculators considered capable and reliable, there is always the risk that these strategies may turn out to be losing ones. In theory, it should still be lower than DIY, in case the trader is not experienced, but this does not mean at all that it is a risk-free choice. 

The fact is that users who choose to do copy trading will have the opportunity to set up the same operations of the lead traders to be automatically executed with their funds, so if the latter lose, so will those who rely on them.

Obviously, when the lead traders make a profit, those who have copied their operations will also profit.