Beginners in the world of crypto have a hard time. Risks, lack of knowledge of the market, wrong decisions - all this leads to losses. Copy trading will cast aside fears and doubts. This method of trading allows you to automatically or manually copy the transactions of professionals and earn. Below we will tell you what copy trading is on decentralized exchanges (DEX) and how it works.
Part 1: The great and wonderful world of DEX
DEX (Decentralized Exchange) - or, in Russian, decentralized cryptocurrency exchanges. They work on blockchain technology. In simple terms, it is a system for storing and transferring virtual funds. In it, records are stored in the form of blocks. They are linked to each other by special keys. If you make adjustments to the records, the entire chain will collapse, since the keys of the blocks will not match.
The main principles of decentralized exchanges:
1) Decentralization and absence of intermediaries
Decentralized exchanges do not have an intermediary in the form of an interested third party, such as the state in a regular bank or the administration on a CEX (centralized exchange). DEX is managed by the users themselves.
2) Using smart contracts for transaction security
Smart contracts are self-executing agreements in which the terms between the buyer and seller are written in the form of lines of code. When the conditions are met by both parties, the contract is automatically executed. Such agreements ensure trust and transparency between the parties, eliminating the need for intermediaries and reducing the risk of fraud in DEX.
DEX vs. CEX: who will win?
Centralized exchanges have their advantages, such as greater liquidity and the exchange of ordinary money for crypto. There are also disadvantages: full verification, administrative control and constant cyberattacks. These nuances were taken into account when creating decentralized exchanges, which, compared to CEX, have advantages:
- confidentiality and anonymity
To register, you need to connect a wallet. DEX does not require your personal data, such as photos or document scans.
- CEX security
is hacked much more often than DEX. In addition, based on the previous point, the user's personal information will not fall into the hands of scammers.
- no control over funds
DEX exchange users have complete control over their assets. Accounts cannot be frozen or blocked for withdrawal.
- low fees
Since transfers exclude intermediaries - peer-to-peer (from person to person) - the commission in DEX is much lower for large amounts. This is important when working with other countries. The speed of transfers in the blockchain is also higher. However, when trading, the commission can be different - up to several hundred dollars. But with the right strategy, you will remain in the black.
Part 2: Getting to Know Copy Trading or How to Simplify Crypto Trading
If translated literally, copy trading consists of two parts: "copy" - copying and "trading" - trading. In other words, repeating transactions. In practice, we choose a trader and repeat his transactions ourselves or with the help of automated systems. What does this mean?
The first type is following signals, or the manual method. The signal provider gives users information: what token (= cryptocurrency) and what settings (for example, stop loss, take profit, entry price, etc.). Then the copy trader decides whether to repeat this transaction or not and determines the entry volume and settings. The manual method is time-consuming, and beginners will not understand it at all.
The second type is automatic copy trading. It involves setting up special software tools for automatic repetition of transactions. This method makes it possible to enter a good token on time.
Advantages of copy trading:
- saving time and accumulating knowledge
For beginners in the crypto world, copy trading is an ideal way to understand how the market works. At the same time, the automated process of concluding transactions saves time.
- lowering the barrier to starting trading
It is not necessary to repeat large transactions. The starting capital can be small, the main thing is to find the right wallet according to the specified criteria.
- risk diversification
Even professional traders can suffer losses. However, these are isolated cases compared to how many bumps you will have to make when trading on your own.
How does copy trading on DEX work?
Smart contracts can be used for automatic copy trading on DEX in set time intervals. It is also worth recalling the privacy that decentralized exchanges provide. You do not care whose transactions you copy, the main thing is their success. Another significant difference between copy trading on DEX and CEX: the deposit size. For example, a trader has $ 100,000, and you have 10 times less. You have to repeat transactions with the same "leverage". And so the market has slumped, but your trader has enough money to withstand the slump, wait for growth and even make money, but you don’t.
But let’s not talk about sad things, let’s move on to the most interesting part – how to start copy trading on DEX?
Part 3: Step-by-step instructions for copy trading on DEX
Step 1. Create a wallet and choose a platform on DEX
There are many DeFi wallets (decentralized). All of them are available on IOS and Android. They can also be downloaded as an extension in the browser. Have you decided where to put the coins, and which tokens will end up in your wallet? There are many systems for monitoring tokens in different DEX networks: Dexscreener, Dextools, Defined and others. They are comprehensive information panels that allow you to track crypto market indicators, their liquidity, market capitalization, trading volume, and trends online in different blockchains. The platforms allow you to connect your wallet and make transactions.
Step 2. Find successful traders on DEX to copy trades
Having decided on the token, let's go looking for traders. There are many of them on DEX, but not all of them have a large baggage of successful trades. To understand who is worth copying, pay attention to important parameters:
- confirmed trading results
The first thing you should pay attention to is the history of the trader's transactions. Study it carefully before choosing the right candidate.
- stability
Stability is the key to success. This also works in copy trading. You need to look at the historical indicators of the chosen candidate. If they gradually increase, it is suitable. Large jumps up and down indicate the opposite.
- reliability
It is worth checking how timely the trader exits the deal. Perhaps he does not have a specific strategy, and he is taking unreasonable risks.
Step 3. Supplementing the arsenal for successful trading on DEX
One of the tools that helps determine the effectiveness of traders is Etherscan. A popular free Ethereum (DEX network) explorer tracks wallet interactions with the blockchain, other wallets and applications so that users can protect themselves and identify suspicious activity.
Sniper bots are also important for copy trading on DEX. They automatically track the actions of the selected trader so as not to copy trades manually.
Part 4: Risks and Limitations of Copy Trading on DEX
Copy trading on DEX is the Wild West, where the strongest earns. And the strongest is the one who has more trading tools, which must be used wisely. What are the risks:
- price fluctuations
Due to the unstable market situation on DEX, entry and closing prices may differ slightly for traders and copy traders.
- trader unpredictability
If a trader makes the wrong choice or suffers losses, this also affects the copy trader's trades.
- technical failures in DEX
Delays in order execution and platform failures may result in not all trades being copied or not being copied at all.
There are many tools that simplify copy trading on decentralized exchanges. They make it safer and more convenient. It is important to stay attentive, open new horizons and not give up. Successful trades!
Part 1: The great and wonderful world of DEX
DEX (Decentralized Exchange) - or, in Russian, decentralized cryptocurrency exchanges. They work on blockchain technology. In simple terms, it is a system for storing and transferring virtual funds. In it, records are stored in the form of blocks. They are linked to each other by special keys. If you make adjustments to the records, the entire chain will collapse, since the keys of the blocks will not match.
The main principles of decentralized exchanges:
1) Decentralization and absence of intermediaries
Decentralized exchanges do not have an intermediary in the form of an interested third party, such as the state in a regular bank or the administration on a CEX (centralized exchange). DEX is managed by the users themselves.
2) Using smart contracts for transaction security
Smart contracts are self-executing agreements in which the terms between the buyer and seller are written in the form of lines of code. When the conditions are met by both parties, the contract is automatically executed. Such agreements ensure trust and transparency between the parties, eliminating the need for intermediaries and reducing the risk of fraud in DEX.
DEX vs. CEX: who will win?
Centralized exchanges have their advantages, such as greater liquidity and the exchange of ordinary money for crypto. There are also disadvantages: full verification, administrative control and constant cyberattacks. These nuances were taken into account when creating decentralized exchanges, which, compared to CEX, have advantages:
- confidentiality and anonymity
To register, you need to connect a wallet. DEX does not require your personal data, such as photos or document scans.
- CEX security
is hacked much more often than DEX. In addition, based on the previous point, the user's personal information will not fall into the hands of scammers.
- no control over funds
DEX exchange users have complete control over their assets. Accounts cannot be frozen or blocked for withdrawal.
- low fees
Since transfers exclude intermediaries - peer-to-peer (from person to person) - the commission in DEX is much lower for large amounts. This is important when working with other countries. The speed of transfers in the blockchain is also higher. However, when trading, the commission can be different - up to several hundred dollars. But with the right strategy, you will remain in the black.
Part 2: Getting to Know Copy Trading or How to Simplify Crypto Trading
If translated literally, copy trading consists of two parts: "copy" - copying and "trading" - trading. In other words, repeating transactions. In practice, we choose a trader and repeat his transactions ourselves or with the help of automated systems. What does this mean?
The first type is following signals, or the manual method. The signal provider gives users information: what token (= cryptocurrency) and what settings (for example, stop loss, take profit, entry price, etc.). Then the copy trader decides whether to repeat this transaction or not and determines the entry volume and settings. The manual method is time-consuming, and beginners will not understand it at all.
The second type is automatic copy trading. It involves setting up special software tools for automatic repetition of transactions. This method makes it possible to enter a good token on time.
Advantages of copy trading:
- saving time and accumulating knowledge
For beginners in the crypto world, copy trading is an ideal way to understand how the market works. At the same time, the automated process of concluding transactions saves time.
- lowering the barrier to starting trading
It is not necessary to repeat large transactions. The starting capital can be small, the main thing is to find the right wallet according to the specified criteria.
- risk diversification
Even professional traders can suffer losses. However, these are isolated cases compared to how many bumps you will have to make when trading on your own.
How does copy trading on DEX work?
Smart contracts can be used for automatic copy trading on DEX in set time intervals. It is also worth recalling the privacy that decentralized exchanges provide. You do not care whose transactions you copy, the main thing is their success. Another significant difference between copy trading on DEX and CEX: the deposit size. For example, a trader has $ 100,000, and you have 10 times less. You have to repeat transactions with the same "leverage". And so the market has slumped, but your trader has enough money to withstand the slump, wait for growth and even make money, but you don’t.
But let’s not talk about sad things, let’s move on to the most interesting part – how to start copy trading on DEX?
Part 3: Step-by-step instructions for copy trading on DEX
Step 1. Create a wallet and choose a platform on DEX
There are many DeFi wallets (decentralized). All of them are available on IOS and Android. They can also be downloaded as an extension in the browser. Have you decided where to put the coins, and which tokens will end up in your wallet? There are many systems for monitoring tokens in different DEX networks: Dexscreener, Dextools, Defined and others. They are comprehensive information panels that allow you to track crypto market indicators, their liquidity, market capitalization, trading volume, and trends online in different blockchains. The platforms allow you to connect your wallet and make transactions.
Step 2. Find successful traders on DEX to copy trades
Having decided on the token, let's go looking for traders. There are many of them on DEX, but not all of them have a large baggage of successful trades. To understand who is worth copying, pay attention to important parameters:
- confirmed trading results
The first thing you should pay attention to is the history of the trader's transactions. Study it carefully before choosing the right candidate.
- stability
Stability is the key to success. This also works in copy trading. You need to look at the historical indicators of the chosen candidate. If they gradually increase, it is suitable. Large jumps up and down indicate the opposite.
- reliability
It is worth checking how timely the trader exits the deal. Perhaps he does not have a specific strategy, and he is taking unreasonable risks.
Step 3. Supplementing the arsenal for successful trading on DEX
One of the tools that helps determine the effectiveness of traders is Etherscan. A popular free Ethereum (DEX network) explorer tracks wallet interactions with the blockchain, other wallets and applications so that users can protect themselves and identify suspicious activity.
Sniper bots are also important for copy trading on DEX. They automatically track the actions of the selected trader so as not to copy trades manually.
Part 4: Risks and Limitations of Copy Trading on DEX
Copy trading on DEX is the Wild West, where the strongest earns. And the strongest is the one who has more trading tools, which must be used wisely. What are the risks:
- price fluctuations
Due to the unstable market situation on DEX, entry and closing prices may differ slightly for traders and copy traders.
- trader unpredictability
If a trader makes the wrong choice or suffers losses, this also affects the copy trader's trades.
- technical failures in DEX
Delays in order execution and platform failures may result in not all trades being copied or not being copied at all.
There are many tools that simplify copy trading on decentralized exchanges. They make it safer and more convenient. It is important to stay attentive, open new horizons and not give up. Successful trades!