Copy Trading

Copy trading is the practice of replicating another trader’s positions, using social platforms, automated tools and signals. Copy trading is popular among forex traders and is widely used within popular third-party platforms, including MetaTrader 4.  We’ll cover the meaning of copy trading along with its key features. We’ll also look at the pros and cons, plus list the best copy trading platforms on the market.

There is a vast range of copycat trading brokers out there, 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.

Above we’ve put together a list of the best brokers with copy trading support. Remember that it’s always important to do your own research to find which one would be best for you.

What Is Copy Trading?

Copy trading allows individuals to automatically or manually copy another trader’s positions when they are opened or closed. Traders communicate their positions using signals via a social network or forum, 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 are blindly copying trades, rather than actually replicating top strategies.

Traders can copy positions in many markets, including forex, stocks, options and CFDs. You can also copy trades on popular crypto coins including Bitcoin (BTC) or major precious metals such as Gold or Platinum.

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 a portfolio, for example, a trader might consider following a long-term investor in the stock market.

Followers need to choose how much to invest and can always choose to fund more or less, depending on the success of the trader. However, copy trading can involve risk, so traders should always carry out their own research and understand how it works before committing capital.

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 it is unlikely that you have much control elsewhere.

Copy Trading Platforms

Depending on the broker, copy trading can be offered either through a proprietary software, or through a third-party platform such as those listed below. Some brokers also offer additional research tools or networking forums, such as Telegram or TradingView.

Copy Trading With MetaTrader 4

MT4 has been set up so you can mirror the trades and strategies of successful traders. Select the Signals tab from within the platform for access to over 3,200 free and paid signals from top forex providers. Traders are ranked in order of results, so it’s quick and easy to choose a provider and select your parameters. You can then start copying trades in both live and demo settings.

Copy Trading With MetaTrader 5

Similar to MT4, you can automatically replicate the trades of others on the MT5 platform. Masters and followers do not need to be signed up with the same broker – the MT5 platform connects traders across continents and brokerages. Subscription prices are fixed in the MT5 market place and rapid data exchanges help to reduce execution delays.

Copy Trading With cTrader

Another popular platform is the integrated cTrader solution. Once clients have opened an account, they can navigate to the Copy area to explore available strategies and compare the history, risk appetite and fees of providers. Clients decide how much they want to allocate to mirror a particular trader, and are free to copy multiple providers simultaneously.

Copy Trading With DupliTrade

DupliTrade offers leading automated copy trading technology. Users have the flexibility to select what proportion of trades they’d like to copy, and the option to scale up and down. Users can copy trades in forex, stocks, indices and commodities markets. Those wishing to sell their trades have to pass a rigorous audit progress while clients are presented with all the facts and figures they need to make an informed decision.

Copy Trading Vs Social Trading

Social trading focuses more on gaining ideas and insights from different websites and services in order to develop new strategies, share tips and invest in tools. Copy trading is more focused on replicating trades and profiting from the results only.

Beginners or new traders may want to start with social trading to help them understand market behaviours and trends, before committing to copy trading. Companies such as Liteforex for example, offer comprehensive networking tools which provide valuable exposure to complex strategies and market research.

Copy Trading Cryptocurrency

Cryptocurrencies are a relatively new entrant to the financial markets, offering volatility and profit potential. Many providers are quickly working to offer copy trading on leading crypto coins, including Bitcoin, Ethereum and Litecoin. Much like you would copy forex positions, users can mirror trades on crypto only pairs plus crypto and fiat currency pairs.

Leading providers, such as eToro, offer copy trading on cryptocurrencies, along with dedicated crypto platforms, such as Coinmatics and 3Commas. The latter two offer intelligent crypto copy trading robots that quickly execute market positions in real-time. Clients benefit from a user-friendly dashboard to follow their investment.

Copy Trading App

One of the benefits of copy trading is that you leave the heavy lifting and analysing of the financial markets to others. As a result, it’s quick and easy to manage your copy account and track results from your mobile.

MetaTrader 4, MetaTrader 5, eToro and many more popular providers offer downloadable mobile apps for iOS and APK devices. One installed, clients can compare traders, consider strategies, fund their account, and start copying trades in a few clicks.

Copy Trading Strategy

It’s important to consider how your own trading strategy aligns to that of providers you wish to copy. This will help to ensure there isn’t a major disparity in risk tolerance, for example.

Important strategy considerations include:

• Risk – Quantify your risk appetite – how much market volatility are you willing to accept and what alerts and tools will you put in place to manage your risk?
• Markets – What financial markets do you want to invest in? Forex, stocks, indices, commodities and cryptocurrencies are all popular markets. It’s important to understand the market you wish to invest your money in.
• Fixed or flexible – How much control do you want to have over your capital? Fixed and fully-automated copy systems will see you mirror trades with minimal control or input. Those wanting more influence and control may want to opt for a more open and flexible system.
• Research – There is a danger with copy trading that clients won’t do their due diligence before investing large sums of money. It’s important to not only carefully research providers before you sign up, but also to regularly monitor trading performance once your capital is on the line.
• Leverage – Leveraged copy trading lets you increase your position sizes with small capital outlay. This means you can increase your profit potential and diversify your portfolio by mirroring the trades of multiple providers. Leverage rates vary depending on your jurisdiction, CySEC regulated providers, for example, cannot offer more than 1:30 leverage.

Copy Trading Signals

As the name suggests, signals are essentially indicators that followers can use to take a position on the markets. Once you’ve received a signal, you can then edit your settings and trading parameters in line with your strategy. Signals tend to offer more flexibility than fixed and automated copy trading. You may want to edit your trade size, stop loss and take profit levels before you execute trades.

MetaTrader 4 and MetaTrader 5 are two leading signals providers, with thousands of top traders offering free and paid alerts.

Pros Of Copy Trading

• 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  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 Of Copy Trading

• 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 USA residents due to the Dodd-Frank Act, which put restrictions on lenders to protect US consumers from abusive practices.

How To Open A Copy Trading Account

To open a copy trading account, you need to sign up for a live account with your chosen broker. Make sure to check your broker’s regulation status beforehand as this will determine the level of security and fund safety provided.

Traders need to deposit funds into their account in order to invest in another account. Depending on your platform, you may need to link your copy investing system to your live account once you receive your login details. The broker will usually provide a guide on how to do this.

Once your accounts are set up, you can start copying trades. We recommend utilising any video tutorial guides beforehand; some brokers offer easy-to-follow YouTube videos, for example. The eToro copy trader guide also provides useful research and content on how to start and apply risk management tools such as Copy Stop-Loss (CSL).

Copy Trading Reviews

Use this table with reviews of the top copy trading brokers to compare all the copy trading platforms we have reviewed. Note that some of these might not accept traders from your country. If we can determine that a broker would not accept your location, it is marked in grey in the table.

Final Word

Copy trading can be a great way for beginners to gain exposure to the markets 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 can involve risk and quite often very little control, so whilst there can be success stories, copy trading doesn’t work for everyone.

FAQ

Further Reading