Copy Trading.
Tobias has been trading for well over 25 years. From traditional stock and equity investments, to higher risk vehicles such as binary options, Toby has seen many trading platforms, charts and trades. He contributes on a regular basis to daytrading.com, both as a writer, and platform reviewer. He is based in the UK.
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Updated December 24, 2022.
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Copy trading is replicating another trader’s positions using social platforms, automated tools and signals. It can be a great way for beginners to gain market exposure and profit with minimal effort. It also allows traders to experience the successes and failures of trading by observing the actions of others. However, it also involves risk and often very little control, so whilst there are many success stories, it doesn’t work for everyone.
This guide will cover what copy trading is, how it works, and how to get started. We will also look at the pros and cons, plus list the best copy trading platforms on the market.
Key Takeaways.
Copy Trading allows investors to copy more experienced traders and benefit from their knowledge and success. It is very easy to get started, and you can start trading with as little as $10. Copy trading can be done on most markets, including the stock market, Forex market and Crypto market. Many brokers provide tools that provide information and transparency when choosing a trader to copy. The investor chooses how much risk he wants to expose himself to by selecting which traders to copy. It is always best to copy more than one trader to increase the diversification of your investment portfolio.
Copy Trading Brokers in Russia.
Skilling.
zulu copy trade trading is available through Skilling Copy. 1000+ strategies can be copied. Strategy providers can generate an additional revenue stream. 80% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Vantage.
With access to over 1000 CFD instruments, traders enjoy social and copy trading at Vantage with the MetaTrader packages, DupliTrade, ZuluTrade and Myfxbook. ZuluTrade is one of the largest social trading communities, which uses a sophisticated algorithm to rank top signal providers.
Deriv.com.
Replicate the positions of experienced traders through signals on DMT5.
What is Copy Trading?
Copy trading is a type of trading where you copy the trades performed by another, more experienced trader. It can be manual, semi-automatic or fully automatic.
Copy trading allows individuals to automatically copy another trader’s positions when they are opened or closed. Experienced traders communicate their positions using signals via social networks or forums, where followers can copy the methods.
The definition of copy trading is closely linked to mirror trading, although the difference with copy trading is that traders blindly copies rather than replicate top strategies.
Traders can copy positions in many markets, including forex, stocks and CFDs. You can also copy trades on popular crypto coins, including Bitcoin (BTC) or major precious metals such as Gold or Platinum.
Copy trading can be a good way to earn a profit and make you rich, but it is important to understand that you will not become rich overnight. If you try to become rich too fast, you will have to copy very high-risk trades, and you will likely end up losing your money. If you use copy trading to build wealth slowly, you will have a fair chance of becoming a millionaire in due time.
All types of trading involve risk, so traders should always carry out their own research and understand how it works before committing capital.
How Does Copy Trading Work?
Copy trading allows you to connect a part of your portfolio with someone else’s, where any opened trades and future actions are automatically copied to your account. This can be a great way to diversify your investments; for example, a trader might consider following a long-term investor in the stock market.
Followers can choose how much funds to allocate to copying a certain trader. You can adjust this amount later depending on the trader’s success.
When a trade is copied into your account, it will normally be an exact copy of the trade performed in the master account (albeit sized to fit your budget). The trade will be replicated with the same stop loss (SL) and take profit (TP) as the original trade. The transaction price will be mirrored as exactly as the market conditions allow. The transaction price can sometimes vary slightly in fast-moving markets. The purchased instruments will be held in your account until the master account chooses to close his position or until the stop loss (SL) or take profit (TP) is triggered.
Note that whilst some platforms may allow you to have some control over your funds, some may operate on a fixed system. A fixed system will allow you to stop copying a trader, but you are unlikely to have much control elsewhere. A fixed system will not allow you to close a position early while still following the master account.
Types of Trading.
Below you will find guides that will help you if you want to start with a particular type of copy trading.
Forex Binary options.
How to Start Copy Trading.
It is very easy to start copy trading. You can get started in just a few minutes.
Choose a broker Open an account Deposit money to your account Choose a trader to copy Choose how much money to use Start trading.
You can read more about each step further down on the page. You can choose to copy more than one trader. To do so, increase your diversification and reduces risk.
Choose a Broker.
There is a vast range of copycat trading brokers offering both proprietary and third-party copy-trading platforms. Some cryptocurrency brokers and exchanges are also catching up and beginning to provide their own social and copy trading tools, including Coinbase and Binance.
We list some of the best copy trading brokers on the market today in the list above. Remember that it’s always important to do your own research to find which one would be best for you.
Open an Account.
To open a trading account, you must sign up for a live account with your broker. Check your broker’s regulation status beforehand, as this will determine the level of security and fund safety provided.
Opening an account is very quick and can be done in a few minutes.
Deposit Money to Your Account.
Once you have opened an account with a broker, you need to deposit money into your account. Most brokers offer a wide selection of ways to deposit money into your account. Most brokers allow you to use bank transfers, Credit Cards and a number of e-wallets. Some brokers even allow you to deposit money through Crypto. Make sure the broker you choose accepts the payment method you want.
How much money you need to start copy trading varies between different brokers. The amount is usually rather low. Some brokers require as little as $10 in your account for you to be able to start trading. Other brokers require a little more, but the amount is seldom more than a couple hundred dollars. This broker list allows you to see how much money you need to deposit to start day trading using different trading platforms.
Choose a Trader to Copy.
You will need to choose which account or accounts you want to follow. It is always better to follow more than one master account. This allows you to earn money even if one account underperforms. Make sure to personally evaluate an account before you decide to subscribe to that account. Make sure that the accounts you follow use a trading risk strategy that you feel comfortable with. The best accounts to follow will vary depending on your risk tolerance and investment goals.
Choose How Much Money to Use.
You will need to decide how much money you want to allocate to copying the traders of each trader you follow. You can use the entire account balance to copy a single trader. This is generally not a good idea since you will expose yourself to significant levels of risk. It is better to subscribe to 10 different traders and allocate each account 10% of the money in your portfolio.
It can also be a good idea to weigh the allocated money based on the risk profile of the copied trader. Allot a lower amount to traders with a high-risk profile that can generate high returns and a larger amount to lower-risk traders that will produce lower returns but are less likely to lose your money.
Only you can decide how to allot your money and how much risk you want to expose yourself to.
Start Trading.
The platform will start trading for you as soon as you have chosen a trader to follow and allocated funds to copy that trader automatically. There is nothing else you need to do.
Now you have to keep track of the results of the trading in your account. You might want to stop a subscription if you feel that it is under performing or you might want to allocate more money to a trader that does exceptionally well.
Pros & Cons.
Pros.
Good for beginners – one of the main benefits is the convenience of having someone else do the work, which means you don’t have to be a copy trader guru or expert to take part. It’s also great for any trader who doesn’t have the time to commit to full-time day trading. Demo accounts – some brokers offer demo copy trading accounts, which are ideal for new traders who want to browse the platforms first. Demo accounts are free of charge, risk-free and often provide access to useful research tools. Authorised practice – copy trading is generally recognised by key regulatory frameworks, including CySEC, ESMA, MiFID and the FCA. Choosing a licensed and reputable broker will ensure your funds are safe and not exposed to scams. Portfolio diversification – traders can gain exposure to opportunities or trends that they wouldn’t usually consider without the help of another trader’s expertise.
Cons.
Risk – the risks can be high even if you choose an experienced trader to copy. If a strategy is unsuccessful, the risk will also translate onto a follower’s account and can result in a financial loss. Control – one of the main disadvantages is the lack of control a trader will have once they begin copying an account; traders are essentially entrusting their portfolio to a stranger. Fees – depending on the broker, copy trading may involve fees. For example, OctaFX clients pay a Masters’ commission which is specified individually and charged in USD per lot of traded volume. There will also be a minimum deposit amount to invest in a trader. At eToro for example, the minimum amount is $200. Not widely available in the United States (US) – copy trading is generally not available to US residents due to the Dodd-Frank Act, which puts restrictions on lenders to protect US consumers from abusive practices.
Risk.
All types of trading are associated with risk. You always risk losing part or all of your investment. Never invest money you can not afford to lose. The risk associated with copy trading depends on the type of asset or security you choose to copy trade. Copying the trades of a trader that trades high-risk assets such as Forex, Crypto or binary options will be high risk. Copying the trades of a trader that trades low-risk securities such as blue chip stocks will be low risk.
You should follow a trader that trades using a risk profile that you feel comfortable with. Many platforms will give you a risk indicator for each trader you can choose to copy, but it is always best to manually inspect their trade history and see if you feel comfortable with their trading strategies and risk profile. When in doubt, choose a broker with a lower-risk profile. You can increase your risk exposure later on, but if you choose a high-risk strategy and lose money, it will be too late to move that money to a lower-risk option since the money is already lost.
A common beginner’s mistake is only copying one trader. A profitable trading history does not guarantee future returns. All traders can produce a period of poor returns or losses. It is always best to split your money and follow more than one trader. This will give you better diversification and will allow you to earn a profit even if one trader has a bad month or year. Diversification will reduce the risk associated with all types of trading and is one of the most basic types of risk management. All beginner traders should try to diversify their investment portfolio.
Other risks associated with copy trading include:
Unrealistic expectations: Beginners might expect unrealistic profits from their investments. This can cause them to feel unsatisfied with the results they achieve or cause them to copy extremely high-risk strategies that have a high chance of losing all their money. No independent perspective: Beginners might assume more risk than they realise by unknowingly following trading accounts with high-risk strategies. This risk is mitigated on platforms with 3rd party information about the master accounts that they can follow. MetaTrader is a good example of this since MetaTrader provides a risk indicator for all signal subscriptions. No diversification: Many beginners choose only to mirror one trader. It is always best to follow multiple accounts. Poor risk management: Traders who use copy trading without much knowledge of the markets might lack the necessary risk management knowledge to use this type of trading safely.
Is Copy Trading Legal?
Yes, Copy trading is legal in the US and most other jurisdictions. You can check if Copy trading is legal in your country below.
Is copy trading legal in?