What is Copy Trading

Copy trading, also known as mirror trading, allows an investor to directly copy the trading activity of another trader. This copying trades technology is frequently used by less experienced traders who wish to copy experienced traders in their day to day trading cycle. This means that beginner traders (copy traders) will rely on more professional traders (strategy providers) to manage for them the opening and closing of trades of various financial instruments across different financial markets. This of course works in the opposite way as well, whereby expert traders, who are often referred to as Strategy Providers, can share their experience with other investors who benefit from it by copying their trading activity. One trader copying trades of another trader can be achieved in a number of ways. The most common methods are by means of generating trading signals and copying trades using purpose built copy trading platforms.

  • Trading Signals are one way communications from an expert trader who will share a particular trade (asset, buy price, buy size, stop loss / take profit level) with followers who can then enter the same information in their own trading accounts and copy trades, thereby mimicking the trade of the expert trader. Trading Signals run on almost all asset classes and enable an investor to copy trade forex, securities, cryptos, options and more.
  • Copy trading usually involves more advanced systems that are designed to manage these signals to copy trades directly to a customer’s account by integrating with their broker account. Copy trading platforms use the same trade copy parameters (asset, buy price, buy size, stop loss / take profit levels) but give the investor the ability to configure according to their available funds and risk profile.

Copying trades is an easy way to get familiar with the world of trading by outsourcing the deeply technical or fundamental concepts of trading to an industry professional. Copy trading is designed to give investors (copy traders) options to choose from, as many copy trading platforms offer a wide selection strategy providers available for selection. Most copy trading services offer user friendly interfaces with charts and statistical data to analyze so that the results of the professional traders and their strategies can be compared to one another. Copy trading platforms allow investors to copy trade forex, stocks, crypto currencies, commodities, Indices, Options and other financial instruments. If such assets are supported by an online broker then the trading can be executed and copied according to the asset characteristics such as lot sizes.

Does copy trading work

Being good at trading is a skill which requires years of dedication, funds, time and patience. The best thing about copying trades is that it offers a short cut to the end result. A beginner trader can use a copy trading platform to choose an expert trader and the desired proportion to copy the trades. From then on all that is left is to let the automation technology manage the daily trading activities. A good copy trading platform will offer investors a qualified selection of expert traders or Strategy Providers. The investor can then decide to copy one or more Strategy Providers and have all the trading activity displayed and summarized in charts and tables so the copying investor can easily follow the performance of the copy trading portfolio.

Once an investor (copy trader) has decided which Strategy Provider to copy trades and funds have been committed to the portfolio, the performance of the portfolio is largely dependent on 3 factors:

  • The movement of the markets
    An investor is not just copying trades of another trader but is effectively copying the markets. What happens in the markets flows on to the investor via the positions opened and closed by the Strategy Provider. So if there is volatility in the markets then there is volatility in the trader’s and copying investor’s accounts.
  • The experience of the expert trader
    An experienced trader should know how to trade under varying conditions. It is less important what assets the trader trades, rather how he trades. Experience means combining both decision making when it comes to maximising profits but also minimising risk in adverse situations. Only by professional trading considerations can an expert trader develop systems that make investors want to copy experienced traders.
  • The nerves of the copy trader investor
    Psychology plays an important role when copying another trader. Specifically the ability to maintain a passive approach during drawdown periods. The ability to make the right decision whether or not to copy trades from a trading strategy depends on the above factors but is in itself a necessary requirement for success. The investor can at any time stop a trade copy but this can also mean losing out on a market reversal or a winning trade that was opened/closed by the Strategy Provider.


How does Copy Trading work

The concept to copy experienced traders is relatively simple. Give interested investors the ability to connect to another account and copy trades. When there is a connection between the two parties, the investor should be able to start copying trades and determine how much of his available funds he wants to use to copy each expert trader. From the other side, expert traders, who usually operate according to a specific trading strategy need the ability to include trade size, the setting of stop loss and take profit levels, on multiple assets such as foreign exchange (FX), equities, indices etc. This means that the investor copying the strategy of another investor will have the same trade proportions copied for all the traded assets as well as the specific trade orders (SL / TP).

Copying trades requires the following to work:

  1. An online broker account
    The copying trades investor and the Strategy Provider need to have online broker accounts. Brokerages offer a full range of products and services to enable their customers to analyze the financial markets and carry out trade orders (buying / selling financial instruments).
  2. Copy trade technology
    The evolution of online trading has largely been focused around solving problems related to latency or delays between wanting to enter into a trade position and the execution of the trade order. In today’s markets execution speed is of the essence and can mean the difference between a successful trade and a losing trade. Therefore a technological system that connects the Strategy Provider to the copying trades investor must be robust and available when financial markets are open.
  3. Copy trade forex interface
    One of the most important elements of copying trades is the ability for the copying investor to determine the proportion of the trade size opened on their behalf by the expert trader. For example, in a copy trade forex platform, the copy ratio can be set to 100% or 1-to-1, which means that for every trade and trade size that the expert opens, the coping trader will also have the exact same trade and trade size opened. An interface is necessary for the copying investor to determine what proportion of the Strategy Provider’s trade’s to copy.

Can you make money copy trading

Copying trades wasn’t developed as a game. It was developed to offer a method whereby professional traders can make it possible for less experienced traders to copy their actions, making it a win-win situation for both parties. But not all professional traders are behind the online trading strategies that can be found across the industry. So the issue of profitability can be affected in a number of ways:

  • Profitability of the professional trader
    Not all traders are equal. Not in intention and not in skill. Unfortunately many professional traders can only prove their worth in the short term. A seasoned trader will need to gain several years of experience and be able to show long term profits instead of wild short term gains (and usually wild plunges too).
  • Profitability of the copy trader
    A profitable copy trader usually has enough equity and margin to weather periods of volatility. Avoiding a margin call on a trading account can only be achieved by having the necessary funds to maintain a level of equity needed to copy trades and keep the investor into forthcoming trade rounds which may (or may not) see the drawdowns decrease. Copying trades does not let the investor off the hook and monitoring of any trading account is always suggested.




Does DupliTrade offer a service to copy trades?

DupliTrade’s copy trading platform combines the best elements of copy trading and automated trading. DupliTrade’s copy traders platform was developed to automate the end-to-end process of copying trades from one account to another. What is in the control of the copy trader is to decide what proportion of the Strategy Provider’s trade sizes to copy. A copy trader can scale up and down the copy trades ratio proportions as required within the predefined risk boundaries of the DupliTrade platform. In addition, an investor can always manage the specifics of the trading activities from his own MT4 / MT5 terminal to manually trade and this is also reflected on the DupliTrade portal.

DupliTrade manages all aspects of the trade copy and the trading data is visually represented throughout the platform, with charts (Balance, Profit, Drawdown, Symbols) and data tables to give investors the information they need to follow and manage their account. DupliTrade hand picks the Strategy Providers that are available to copy. DupliTrade’s strategies copy trade forex, stocks, commodities and indices. You can read more about the strict auditing process that expert traders have to pass in order to be offered to on the platform. Copying trades can be started with just a few clicks.